Question

Purple Company has $200,000 in net income for 2017 before deducting any compensation or other payment to its sole owner, Kirsten. Kirsten is single and has no dependents. She claims the $6,350 standard deduction, and her personal exemption is $4,050 for 2017. Purple Company is Kirsten's only source of income.

Ignoring any employment tax considerations, compute Kirsten's after-tax income for each of the following situations.

Click here to access the corporate tax table and 2017 individual tax rate schedule to use for this problem.

When required, carryout intermediate tax computations to the nearest cent and then round your final tax liability to the nearest dollar.

a. If Purple Company is a proprietorship and Kirsten withdraws $50,000 from the business during the year, Kirsten 's taxable income is
$, and her after-tax income is $.

Feedback

Business operations can be conducted in a number of different forms. Among the various possibilities are the following: Sole proprietorships; Partnerships; Trusts and estates; S corporations; Regular corporations and Limited liability companies. For Federal income tax purposes, the distinctions among these forms of business organization are very important.

b. Purple Company is a C corporation and the corporation pays out all of its after-tax income as a dividend to Kirsten. Purple Corporation's after-tax income is $ and Kristen's after tax income is $.

Feedback

Incorrect

c. Purple Company is a C corporation and the corporation pays Kirsten a salary of $138,750. Kirsten's after-tax income is $.

Feedback

Incorrect

Answer 1