In 2000, Craig and Kathy Khumalo Owned a Small Business

question 35

Multiple Choice

In 2000, Craig and Kathy Khumalo owned a small business which was held as a proprietorship in Kathy's name.They were thinking of incorporating if that would lower their total tax liability.The Khumalos expected the company to earn R100,000 before taxes next year.They planned to take out a salary of R45,000, and to reinvest the rest in the business.Their personal deductions total R10,750 and if they choose not to incorporate they will file a joint return.(1) What is their expected total tax liability as a proprietorship? (2) As a corporation? (3) Should they incorporate?

• A) R19,393.50; R22,250.00; No
• B) R19,393.50; R13,887.50; Yes
• C) R6,793.50; R6,637.50; Yes
• D) R22,403.50; R15,753.50; Yes
• E) R20,777.50; R22,250.00; No

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