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How much pretax income does it currently take

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Question - Tawana owns and operates a sole proprietorship and has a 37 percent marginal tax rate. She provides her son, Jonathon, $6,000 a year for college expenses. Jonathon works as a pizza delivery person every fall and has a marginal tax rate of 15 percent.

a. How much pretax income does it currently take Tawana to generate the $6,000 (after-taxes) given to Jonathon?

b. If Jonathon worked for his mother's sole proprietorship, what salary would she have to pay him to generate $6,000 after taxes (ignoring any Social Security, Medicare, or self-employment tax issues)?

c. How much money would the strategy save?

Reference no: EM133010251

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