A sole proprietor in the 39.6% tax bracket pays her 16-year-old son a reasonable salary of $10,000 for services performed for the proprietorship.Compute the family's tax savings if the son has no other income,is claimed as a dependent on his parents' return,and takes a $6,350 standard deduction.

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The sole proprietor saves $3,960 in taxes (39.6% of $10,000) by paying her son. The son's taxable income is $3,650 ($10,000 - $6,350 standard deduction), and his tax is $365 (10% of $3,650). The family's net tax savings is $3,595 ($3,960 - $365).

A Sole Proprietor in the 39