9Part 1 of 21.9points[The following information applies to the questions displayed below.]Sandra would like to organize LAB (a legal corporation) as either an S corporation or a C corporation for tax purposes. Ineither form, the entity is expected to generate an 8 percent annual before-tax return on a $875,000 investment. Sandra'smarginal income tax rate is 37 percent and her tax rate on qualified dividends and net capital gains is 20 percent. LAB'sincome is not qualified business income (QBI), so Sandra is not allowed to claim the QBI deduction. Assume that LAB willdistribute all of its earnings after entity-level taxes every year. Ignore the additional Medicare tax and the net investmentincome tax when computing your answers.Note: Round your intermediate computations to the nearest whole dollar amount.Problem 04-51 Part a (Algo)a. How much cash after taxes would Sandra receive from her investment in the first year if LAB is organized as either an S corporationor a C corporation?Answer is complete but not entirely correct.After-tax cash flowS corporation$44,100C corporation$29,540 x

To solve this problem, we need to calculate the after-tax cash flow for both the S corporation and…

Answered: 9 Part 1 of 2 1.9 points [The following…

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter3: Organizing And Financing A New Venture

Section: Chapter Questions

Problem 2EP

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Required information Skip to question [The following information applies to the questions displayed below.] Sandra would like to organize LAB (a legal corporation) as either an S corporation or a C corporation for tax purposes. In either form, the entity is expected to generate an 8 percent annual before-tax return on a $500,000 investment. Sandra's marginal income tax rate is 37 percent and her tax rate on qualified dividends and net capital gains is 20 percent. LAB's income is not qualified business income (QBI), so Sandra is not allowed to claim the QBI deduction. Assume that LAB will distribute all of its earnings after entity-level taxes every year. Ignore the additional Medicare tax and the net investment income tax when computing your answers. Note: Round your intermediate computations to the nearest whole dollar amount. b. What is the overall tax rate on LAB's income in the first year if LAB is organized as an S corporation or as a C corporation? Note: Round your…
! Required information [The following information applies to the questions displayed below.] Sandra would like to organize LAB (a legal corporation) as either an S corporation or a C corporation for tax purposes. In either form, the entity is expected to generate an 8 percent annual before-tax return on a $1,075,000 investment. Sandra's marginal income tax rate is 37 percent and her tax rate on qualified dividends and net capital gains is 20 percent. LAB's income is not qualified business income (QBI), so Sandra is not allowed to claim the QBI deduction. Assume that LAB will distribute all of its earnings after entity-level taxes every year. Ignore the additional Medicare tax and the net investment income tax when computing your answers. Note: Round your intermediate computations to the nearest whole dollar amount. b. What is the overall tax rate on LAB's income in the first year if LAB is organized as an S corporation or as a C corporation? Note: Round your final answers to 2 decimal…
Assume your new venture, organized as a proprietorship, is in its first year of operation. You expect to have taxable income of $50,000. Use the income tax rate information contained in Figure 3.6 to estimate the amount of income taxes you would have to pay. Requirement: If your venture had been organized as a standard corporation instead of a proprietorship, calculate your income tax liability.
5.Tremaine would like to organize UTA as either an S Corporation or a C corporation. In either form, the entity will generate a 10 percent annual before-tax return on a $1,200,000 investment. Tremaine’s marginal income tax rate is 37 percent and his tax rate on dividends and capital gains is 23.8 percent (including the net investment income tax). If Tremaine organizes UTA as an S corporation he will be allowed to claim the deduction for qualified business income. Also, because Tremaine will participate in UTA’s business activities, the income from UTA will not be subject to the net investment income tax. Assume that UTA will pay out 100 percent of its after-tax earnings every year as a dividend if it is formed as a C corporation. How much would cash after-taxes would Tremaine receive from his investment in the first year if UTA is organized as either an S corporation? 6.Same facts as in Question 5 above. How much would cash after-taxes would Tremaine receive from his investment in the…
! Required information Problem 04-48 (LO 04-3) (Algo) [The following information applies to the questions displayed below.] Andrea would like to organize SHO as either an LLC (taxed as a sole proprietorship) or a C corporation. In either form, the entity is expected to generate an 10 percent annual before-tax return on a $320,000 investment. Andrea's marginal income tax rate is 35 percent and her tax rate on dividends and capital gains is 15 percent. Andrea will also pay a 3.8 percent net investment income tax on dividends and capital gains she recognizes. If Andrea organizes SHO as an LLC, she will be required to pay an additional 2.9 percent for self-employment tax and an additional 0.9 percent for the additional Medicare tax. Further, she is eligible to claim the deduction for qualified business income. Assume that SHO will pay out all of its after-tax earnings every year as a dividend if it is formed as a C corporation. Problem 04-48 Part a (Algo) a. How much cash after taxes would…
+ Tremaine would like to organize UTA as either an S Corporation or a C corporation. In either form, the entity will generate a 9 percent annual before-tax return on a $1,000,000 investment. Tremaine's marginal income tax rate is 37 percent, and his tax rate on dividends and capital gains is 23.8 percent (including the net investment income tax). If Tremaine organizes UTA as an S corporation, he will be allowed to claim the deduction for qualified business income. Also, because Tremaine will participate in UTA's business activities, the income from UTA will not be subject to the net investment income tax. Assume that UTA will pay out 25 percent of its after-tax earnings every year as a dividend if it is formed as a C corporation. a. How much cash after taxes would Tremaine receive from his investment in the first year if UTA is organized as either an S corporation or as a C corporation? b. What is the overall tax rate on UTA's income in the first year if UTA is organized as an S…
Assume that the corporate tax rate is 34% and the personal tax rate is 30%. The founders of a newly formed earnings, so all of its after-tax income will be paid out to its investors, who will have to pay personal taxes or can spend under the corporate and partnership forms of organization? O a. 21.90% O b. 28.56% O c. 23.56% O d. 23.80% O e. 22.61%
Calculate Anaheim Corporation's excess net passive income tax in each of the following alternative scenarios: a. Passive investment income, $100,000; expenses associated with passive investment income, $40,000; gross receipts, $208,000; taxable income if a C corporation, $22,400; corporate Earnings and profit, $41,000. Excess net passive income tax??? b. Passive investment income, $100,000; expenses associated with passive investment income, $70,000; gross receipts, $208,000; taxable income if a C corporation, $5,600; corporate Earnings and profit, $41,000. Excess net passive income tax??? c. Passive investment income, $100,000; expenses associated with passive investment income, $40,000; gross receipts, $208,000; taxable income if a C corporation, $22,400; corporate Earnings and profit, $0. Excess net passive income tax???
b. What is the overall tax rate on LAB's income in the first year if LAB is organized as an S corporation or as a C corporation? Note: Round your final answers to 2 decimal places. s corporation C corporation Overall Tax Rate 37.00 % %6
16. Which of the following statement is true? O A. The corporate income tax rate is a flat 23% for all corporations with taxable income OB. A brother-sister controlled group can file a consolidated return if all members of the group consent. ⒸC. Cash basis corporations can only deduct charitable contributions in the year made OD. Most corporations with gross receipts over $15 million must use the accrual method of accounting
Required information Problem 12-51 (LO 12-3) (Algo) Skip to question [The following information applies to the questions displayed below.] Sandra would like to organize LAB as either an LLC (taxed as a sole proprietorship) or a C corporation. In either form, the entity is expected to generate an 13 percent annual before-tax return on a $660,000 investment. Sandra’s marginal income tax rate is 37 percent, and her tax rate on dividends and capital gains is 23.8 percent (including the 3.8 percent net investment income tax). If Sandra organizes LAB as an LLC, she will be required to pay an additional 2.9 percent for self-employment tax and an additional 0.9 percent for the additional Medicare tax. LAB’s income is not qualified business income (QBI) so Sandra is not allowed to claim the QBI deduction. Assume that LAB will distribute all of its after-tax earnings every year as a dividend if it is formed as a C corporation. (Round your intermediate computations to the nearest whole dollar…
TABLE 3.6 Personal tax rates, 2022. Taxable Income ($) Single Taxpayers Married Taxpayers Filing Joint Returns Tax Rate (%) 0-9,950 0-19, 900 10 % 9,950-40, 525 19,900-81, and above 628, 300 and above 37% \\\ You have set up your tax preparation firm as an incorporated business. You took $80,000 from the firm as your salary. The firm's taxable income for the year (net of your salary) was $30,000. Assume you pay personal taxes as an unmarried taxpayer. Use the tax rates presented in Table 3.6. How much tax must be paid to the federal government, including both your personal taxes and the firm's taxes? By how much will you reduce the total tax bill if you cut your salary to $50,000, thereby leaving the firm with taxable income of $60,000? What allocation will minimize the total tax bill? Hint: Think about marginal tax rates and the ability to shift income from a higher marginal bracket to a lower one. Note: Do not round your intermediate calculations. Round your final answers to nearest…

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