A wealthy taxpayer is planning to start an Internet-based business. The taxpayer expects to generate tax losses for at least the first 5 years of the business. The taxpayer also hopes to cash out of the business within 10 years by either going public or selling to another business.

Explain, in words, how it might be possible to lower the shareholder-level tax to the required rate such that the after-tax rate of return to the taxpayer is the same in a corporate form.

Answer rating: 100% (QA)

In order to ensure that the pretax rates are the same for th... View the full answer