Jay owns 100% of Kaye Company. In 2020, Kaye Company recognizes a long-term capital gain (LTCG) of
Question:
Jay owns 100% of Kaye Company. In 2020, Kaye Company recognizes a long-term capital gain (LTCG) of $100,000. Kaye Company has no other income or loss. Assume that Jay (an individual) is in the 37% tax bracket and has no recognized capital gains or losses in 2020.
1. How much tax will Kaye Company owe on the $100,000 LTCG assuming that Kaye is a corporation?
2. How much tax will Kaye Company owe on the $100,000 LTCG if Kaye Company is a sole proprietorship?
Jay owns 100% of Kaye Company. Jay (an individual) is in the 37% tax bracket. Assume that Kaye Company is a corporation and distributes $50,000 cash to Jay as a dividend.
3. How much tax must Jay pay on this $50,000 dividend?
Jay owns 100% of Kaye Company. Jay (an individual) is in the 37% tax bracket. Assume that Kaye Company is a sole proprietorship and distributes $50,000 of cash to Jay.
4. How much tax must Jay pay on this $50,000 distribution?
Briefly describe the concept of double taxation. Particularly explain how corporations are subject to double taxation while a sole proprietorship is not subject to double taxation.
Intermediate Accounting Reporting and Analysis
ISBN: 978-1285453828
2nd edition
Authors: James M. Wahlen, Jefferson P. Jones, Donald Pagach