Post #18960 by bighairymike on the US Policy board

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Scenario 3: You pay the money to the lawyer who has to recognize it as income, you pay him $130k, plus 30% of $130k, or another $39,000. Total is now $169k.

But wait, the taxes on $169k are more than the taxes on $130k, so now you have to pay an extra $48,000 to cover the lawyer’s personal taxes. $130k + $48k = Total: $178,000.

But wait, the taxes on $178,000 are more than the taxes on $130k, so how you have to pay an extra $53,400. Total now: 130k + $53,400 = $183,400. - goofy

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That may be how you do the math but the correct way to set up the problem is, "What is Amount X that if you tax it at 30% leaves Cohen with $130,000?"

ie, X times 0.7 = $130,000

therefore X equals $130,000 / 0.7 = $185,714.30. Slip Cohen an underhanded check for that amount and after he pays 30% ($55.714.29) of it in taxes, he will have $130,000.01 left, enough to pay Stormy and still have a penny for himself.

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