In 2000, Craig and Kathy Koehler Owned a Small Business

Multiple Choice

In 2000, Craig and Kathy Koehler owned a small business which was held as a proprietorship in Kathy's name.They were thinking of incorporating if that would lower their total tax liability.The Koehlers expected the company to earn $100,000 before taxes next year.They planned to take out a salary of $45,000, and to reinvest the rest in the business.Their personal deductions total $10,750 and if they choose not to incorporate they will file a joint return.(1) What is their expected total tax liability as a proprietorship? (2) As a corporation? (3) Should they incorporate?

A) $19,393.50; $22,250.00; No
B) $19,393.50; $13,887.50; Yes
C) $6,793.50; $6,637.50; Yes
D) $22,403.50; $15,753.50; Yes
E) $20,777.50; $22,250.00; No