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 $500,000 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.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?S corporationC corporationAfter tax cash flowShow Transcribed TextMason (single) is a 50 percent shareholder in Angels Corporation (an S Corporation). Mason receives a $180,000 salaryworking full time for Angels Corporation. Angels Corporation reported $400,000 of taxable business income for the year(2022) Before considering his business income allocation from Angels and the self-employment tax deduction (if any).Mason's adjusted gross income is $180,000 (all salary from Angels Corporation). Mason claims $50,000 in itemizeddeductions. Answer the following questions for Mason.Note: Leave no answer blank. Enter zero if applicable.c. Assume the same facts as question (b), except that Angels Corporation reported $150,000 of taxable business income for the year.What is Mason's deduction for qualified business income? Ignore the wage-based limitation when computing the deduction.Deduction for qualified business income

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a. How much cash after taxes would Sandra receive from her investment in the first year if LAB is organized as either an S corporation or a C corporation? S corporation C corporation After tax cash flow

a. How much cash after taxes would Sandra receive from her investment in the first year if LAB is organized as either an S corporation or a C corporation? S corporation C corporation After tax cash flow

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter13: Choice Of Business Entity—general Tax And Nontax Factors/formation

Section: Chapter Questions

Problem 75DC

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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 final answers to 2 decimal places.
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. a. How much cash after taxes would Sandra receive from her investment in the first year if LAB is organized as either an S corporation or a C corporation? 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…
Sandra would like to organize LAB (a legal corporation) as either an Scorporation or a C corporation for tax purposes. In either form, the entity isexpected to generate an 8 percent annual before-tax return on a $500,000investment. Sandra marginal income tax rate is 37 percent and her tax rateon qualified dividends and net capital gains is 20 percent. LAB income is notqualified business income (QBI), so Sandra is not allowed to claim the QBIdeduction. Assume that LAB will distribute all of its earnings after entity-leveltaxes every year. Ignore the additional Medicare tax and the net investmentincome tax when computing your answers. b. What is the overall tax rate on LAB income in the first year if LAB isorganized as an S corporation or as a C corporation?
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 retum 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 (OBI), 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 places..
Sandra would like to organize LAB (a legal corporation) as either an Scorporation or a C corporation for tax purposes. In either form, the entity isexpected to generate an 8 percent annual before-tax return on a $500,000investment. Sandra marginal income tax rate is 37 percent and her tax rateon qualified dividends and net capital gains is 20 percent. LAB income is notqualified business income (QBI), so Sandra is not allowed to claim the QBIdeduction. Assume that LAB will distribute all of its earnings after entity-leveltaxes every year. Ignore the additional Medicare tax and the net investmentincome tax when computing your answers. a. How much cash after taxes would Sandra receive from her investment inthe first year if LAB is organized as either an S corporation or a Ccorporation?
Mackenzie is considering conducting her business, Mac561, as either a single member LLC or as an S corporation. Determine Mackenzie’s after-tax cash flow from the entity’s business income and any compensation she receives from the business assuming her marginal ordinary income tax rate is 37 percent, her marginal FICA rate on employee compensation is 1.45 percent, her marginal self-employment tax rate is 2.9 percent, and any employee compensation or self-employment income she receives is subject to the 0.9 percent additional Medicare tax. Finally, Mac561 generated $200,000 of business income before considering the deduction for compensation Mac561 pays to Mackenzie and Mackenzie can claim the full qualified business income deduction on Mac561’s business income. (Round your intermediate computations to the nearest whole dollar amount.) a. Mackenzie conducted Mac561 as a single-member LLC. A). After-tax cash flow $_________________
Sandra would like to organize BAL as either an LLC (taxed as a sole proprietorship) or a C corporation. In either form, the entity is expected to generate an 7 percent annual before-tax return on a $690,000 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 BAL 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. BAL’s income is not qualified business income (QBI) so Sandra is not allowed to claim the QBI deduction. Assume that BAL 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 amount.) a. How much cash after taxes would Sandra receive from her investment in the first year if BAL is organized as either an LLC or a…
Amanda would like to organize BAL as either an LLC (taxed as a sole proprietorship) or a C corporation. In either form, the entity is expected to generate an 8 percent annual before-tax return on a $500,000 investment. Amanda’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 Amanda organizes BAL 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. Also, she is eligible to claim a full deduction for qualified business income on BAL’s income. Assume that BAL will distribute half 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 Amanda receive from her investment in the first year if BAL is organized as either an LLC or a C corporation? (Round intermediate calculations and your final answers to the nearest…
Sandra would like to organize BAL as either an LLC (taxed as a sole proprietorship) or a C corporation. In either form, the entity is expected to generate an 8 percent annual before-tax return on a $520,000 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 BAL 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. BAL’s income is not qualified business income (QBI) so Sandra is not allowed to claim the QBI deduction. Assume that BAL will distribute all of its after-tax earnings every year as a dividend if it is formed as a C corporation How much cash after taxes would Sandra receive from her investment in the first year if BAL is organized as either an LLC or a C corporation? b. What is the overall tax rate on BAL’s income in the first year…
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 amount.) Problem 15-51 Part a (Algo) a. How much cash after taxes would Sandra receive from her investment in the first year if LAB is…
Amanda would like to organize BAL as either an LLC (taxed as a sole proprietorship) or a C corporation. In either form, the entity is expected to generate an 8 percent annual before-tax return on a $500,000 investment. Amanda'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 Amanda organizes BAL 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. Also, she is eligible to claim a full deduction for qualified business income on BAL's income. Assume that BAL will distribute half of its after-tax earnings every year as a dividend if it is formed as a C corporation. (Do not round intermediate calculations and round your final answers to the nearest whole dollar.) a. How much cash after taxes would Amanda receive from her investment in the first year if BAL is organized as either an…
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 11 percent annual before-tax return on a $240,000 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, Andrea will be required to pay an additional 2.9 percent for self-employment tax and an additional .9 percent for the additional Medicare tax. Further, she is eligible to claim the full deduction for qualified business income. Assume that SHO will pay out its all of its after-tax earnings every year as a dividend if it is formed as a C corporation. How much cash after-taxes would Amanda receive from her investment in the first year if SHO is organized as an LLC? Same facts as in Question 1 above. How much cash…