Choosing a Business Form 249
even. If Phil operated the business as a sole proprietorship, by contrast, the
loss calculated on his Schedule C would be netted against the dividend and
interest income generated by his investments, thus effectively rendering
$100,000 of that income tax free. One can strongly argue, therefore, that the
form in which one should operate one’s business is dictated in part by the
likelihood of its short-term success and the presence or absence of other in-
come f lowing to its owner.
EXHIBIT 8.2 Individual federal income tax rates.
Under
$6,000
Over
$27,050
Over
$65,550
Over
$136,750
Over
$297,350
Marginal tax rate (percent)
Individual income 2001
0
10
20
30
40
50
Over
$6,000
EXHIBIT 8.3 Corporate federal income tax rates.
Below $50 >$50 >$75 >$100 >$335 >$10,000 >$15,000 >$18,333
Marginal tax rate (percent)
Corporate income (thousands)
0
10
20
30
40
50