Jayzee Is a Single Taxpayer Who Operates a Sole Proprietorship

question 59

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 2016 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?

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Definitions:

Sensation

The process by which our sensory receptors and nervous system receive and represent stimulus energies from our environment.

Perception

The process by which organisms interpret and organize sensory information to understand their environment.

Receptors

Biological proteins located on cell surfaces or within cells that bind to specific molecules, triggering a response in the cell.

Sticky Mittens

An experimental tool used in developmental psychology research to explore early infant learning and motor skills development, allowing infants to grasp objects earlier than they would naturally.