A company had revenue of $170,000 and incurred business expenses of $50,000 in 2007?

Question

The owner of the company, is single and has no dependents. He uses the $5,350 standard deduction in computing taxable income for 2007. The personal exemption amount for 2007 is $3,400. This is his only source of income. Compute after-tax income if:

a. the company is a sole proprietorship, and the owner withdraws $80,000 for living expenses during the year.

b. the company is a corporation, the owner is the sole shareholder, and the corporation pays out all of its after-tax income as a dividend to the owner.

c. the company is a corporation, the owner is the sole shareholder, and the corporation pays the owner a salary of $89,950. This will increase the corporation’s business expenses to $139,950.

Answer 1

And your question is.....? Let me try to guess. You're wondering if this is a viable business. The incorporation by a sole proprietor scares the h**l out of me. There's another business in here somewhere. For example; XY owns 2 motels, incorporated, so there's one set of books. One loses money, the other makes money and supports the other. XY puts the loser up for sale; and here's the books. That's legal.

Answer 2

What's your question? I find it very hard to understand what you want to know

Answer 3

a) The withdrawal of $80k for living expenses won't effect the tax decision coz it not effect the P/L ac.  It shows as advance in the accounts.

b) The gross dividend receive by the owner is an income for him.  The tax paid out by the corporation is the owner tax credit.

c) The owner r increase his income amounted $ 89950 & tax increase.