A sole proprietor in the 37% tax bracket pays her 16-year-old son a reasonable salary of $14,000 for services performed for the proprietorship. Compute the family's tax savings if the son has no other income and takes a $12,000 standard deduction.

Question

Quizplus · Accepted Answer

$5,180 tax savings from deduction ($14,000 × 37%) - $200 tax on child's $2,000 taxable income ($14,000 - $12,000).

A Sole Proprietor in the 37% Tax Bracket Pays Her