Principles Of Taxation For Business And Investment Planning 2020 Edition
23rd Edition
ISBN: 9781259969546
Author: Sally Jones, Shelley C. Rhoades-Catanach, Sandra R Callaghan
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 12, Problem 2AP
Grant and Marvin organized a new business as a corporation in which they own equal interests. The new business generated a $65,000 operating loss for the year.
- a. Assume the corporation expects to generate $500,000 of income next year and has a 21 percent tax rate. Calculate the
net present value of the future tax savings associated with the current year operating loss, using a 4 percent discount rate. - b. Now assume that the corporation makes an election under Subchapter S to be treated as a passthrough entity. If Grant’s marginal tax rate is 35 percent and Marvin’s marginal tax rate is 37 percent, calculate the tax savings associated with the current year operating loss. Assume the excess business loss limitation does not apply.
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Grant and Marvin organized a new business as a corporation in which they own equal interests. The new business generated a $65,000 operating loss for the year. Use Appendix A.
b. Now assume that the corporation makes an election under Subchapter S to be treated as a passthrough entity. If Grant's marginal
tax rate is 35 percent and Marvin's marginal tax rate is 37 percent, calculate the tax savings associated with the current year operating loss. Assume the basis and excess business loss limitations do not apply.
* I only need Requirement B to be solved
Grant and Marvin organized a new business as a corporation in which they own equal interests. The new business generated a
$65,000 operating loss for the year. Use Appendix A.
Required:
a. Assume the corporation expects to generate $500,000 of income next year and has a 21 percent tax rate. Calculate the net present
value of the future tax savings associated with the current year operating loss, using a 4 percent discount rate.
Note: Do not round intermediate computations. Round your final answer to the nearest whole dollar amount.
NPV of future tax savings
b. Now assume that the corporation makes an election under Subchapter S to be treated as a passthrough entity. If Grant's marginal
tax rate is 35 percent and Marvin's marginal tax rate is 37 percent, calculate the tax savings associated with the current year
operating loss. Assume the basis and excess business loss limitations do not apply.
Current year tax savings
2. Grant and Marvin organized a new business as a corporation in which they own equal interests. The new business
generated a $65,000 operating loss for the year.
a. Assume the corporation expects to generate $500,000 of income next year and has a 21 percent tax rate
Calculate the net present value of the future tax savings associated with the current year operating loss, using a
4 percent discount rate
b. Now assume that the corporation makes an election under Subchapter S to be treated as a passthrough entity. If
Grant's marginal tax rate is 35 percent and Marvin's marginal tax rate is 37 percent, calculate the tax savings
associated with the current year operating loss. Assume the excess business loss limitation does not apply.
Chapter 12 Solutions
Principles Of Taxation For Business And Investment Planning 2020 Edition
Ch. 12 - Mr. and Mrs. Velotta are self-employed...Ch. 12 - Prob. 2QPDCh. 12 - Ms. Johnson is eager to create a family...Ch. 12 - Discuss the tax and nontax reasons why the stock...Ch. 12 - Mr. Eros operates an antique store located on the...Ch. 12 - Prob. 6QPDCh. 12 - Prob. 7QPDCh. 12 - Prob. 8QPDCh. 12 - Prob. 9QPDCh. 12 - Prob. 10QPD
Ch. 12 - Prob. 11QPDCh. 12 - Ms. Knox recently loaned 20,000 to her closely...Ch. 12 - Explain the logic of the tax rate for both the...Ch. 12 - Prob. 14QPDCh. 12 - Prob. 15QPDCh. 12 - Prob. 16QPDCh. 12 - Mr. Tuck and Ms. Under organized a new business as...Ch. 12 - Grant and Marvin organized a new business as a...Ch. 12 - Prob. 3APCh. 12 - Ms. Kona owns a 10 percent interest in Carlton...Ch. 12 - Mrs. Franklin, who is in the 37 percent tax...Ch. 12 - Prob. 6APCh. 12 - Prob. 7APCh. 12 - Prob. 8APCh. 12 - Prob. 9APCh. 12 - Prob. 10APCh. 12 - Prob. 11APCh. 12 - Prob. 12APCh. 12 - Prob. 13APCh. 12 - Ms. Xie, who is in the 37 percent tax bracket, is...Ch. 12 - Prob. 15APCh. 12 - In 1994, Mr. and Mrs. Adams formed ADC by...Ch. 12 - Prob. 17APCh. 12 - Prob. 18APCh. 12 - Prob. 19APCh. 12 - Prob. 20APCh. 12 - Prob. 21APCh. 12 - Prob. 1IRPCh. 12 - Prob. 2IRPCh. 12 - Prob. 3IRPCh. 12 - REW Inc. is closely held by six members of the REW...Ch. 12 - Prob. 5IRPCh. 12 - Prob. 6IRPCh. 12 - Prob. 7IRPCh. 12 - Prob. 8IRPCh. 12 - Prob. 9IRPCh. 12 - Prob. 10IRPCh. 12 - Prob. 2TPCCh. 12 - Prob. 3TPC
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