The Portable MBA in Finance and Accounting, 3rd Edition

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