SWFT Comprehensive Vol 2020
43rd Edition
ISBN: 9780357391723
Author: Maloney
Publisher: Cengage
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am. 02.
Transcribed Image Text:At the beginning of the year, Mr. Lanier put $50,000 cash into Investment X. At the end of the
year, he received a check for $2,800, representing his annual return on the investment. Mr.
Lanier's marginal tax rate on ordinary income is 37 percent. However, his return on Investment X
is a capital gain taxed at 20 percent. At the beginning of the year, Mr. Lanier could have invested
his $50,000 in Business Z with an 8 percent annual return. However, this return would have been
ordinary income rather than capital gain.
Required:
a. Considering the fact that Mr. Lanier could have invested in Business Z, how much implicit tax
did he pay with respect to Investment X?
b. Did Mr. Lanier make the correct decision by putting his $50,000 into Investment X instead of
Business Z?
Complete this question by entering your answers in the tabs below.
Required A Required B
Considering the fact that Mr. Lanier could have invested in Business Z, how much implicit tax did he pa
Investment X?
Implicit tax paid
$
0
< Required A
Required B
>
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