Jayzee Is a Single Taxpayer Who Operates a Sole Proprietorship

question 50

Essay

Jayzee is a single taxpayer who operates a sole proprietorship. He expects his taxable income next year to be $150,000, of which $125,000 is attributed to his sole proprietorship. Jayzee is contemplating incorporating his sole proprietorship. Using the 2020 single individual tax brackets and the corporate tax brackets, how much current tax could this strategy save Jayzee? (Ignore any Social Security, Medicare, or self-employment tax issues.)How much income should be retained in the corporation? (Use tax rate schedule)

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Definitions:

Stethoscope Endpiece

The part of a stethoscope that is placed against the patient's skin to listen to internal body sounds, such as heartbeats and breathing.

Bell Side

The larger, concave side of a stethoscope used for listening to lower-pitched sounds in the body such as heart murmurs.

Percussing Over Liver

The act of tapping on the skin overlying the liver to assess its size and density, part of a physical examination to detect liver abnormalities.

Dull Sound

A sound with low resonance, often indicative of a change in lung or pleural space in medical contexts.