Lydia is starting a new business. She expects to earn a before-tax rate of return equal...

 

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Lydia is starting a new business. She expects to earn a before-tax rate of return equal to 8% and she plans to operate the business for a minimum of 3 years. Lydia's business operates in an industry that is eligible for the QBI deduction. Lydia makes an initial investment of $50,000 in the business at the beginning of 2020. Lydia is also starting to save for her retirement. Lydia is considering investing in the following savings vehicles for a 40-year investment period: Roth IRA, investment amount $6,000, expected before tax rate of return 7% Deductible IRA, investment amount $4,000, expected before tax rate of return = 8% Lydia has the following tax rates: • Current marginal tax rate 24% Current capital gains tax rate 15% Marginal tax rate during retirement 12% • Capital gains tax rate during retirement = 0% !! Record the following items in the text box below. Show support for your work on your scratch paper in order to receive credit. Record the following items in the text box below. Show support for your work on your scratch paper in order to receive credit. Items to report: • After-tax return, in $, if Lydia organizes her business as a sole proprietorship • After-tax return, in $, if Lydia organizes her business as a C corporation • After-tax rate of return, in %, if Lydia decides to save for retirement using a Roth IRA After-tax rate of return, in %, if Lydia decides to save for retirement using a deductible IRA Lydia is starting a new business. She expects to earn a before-tax rate of return equal to 8% and she plans to operate the business for a minimum of 3 years. Lydia's business operates in an industry that is eligible for the QBI deduction. Lydia makes an initial investment of $50,000 in the business at the beginning of 2020. Lydia is also starting to save for her retirement. Lydia is considering investing in the following savings vehicles for a 40-year investment period: Roth IRA, investment amount $6,000, expected before tax rate of return 7% Deductible IRA, investment amount $4,000, expected before tax rate of return = 8% Lydia has the following tax rates: • Current marginal tax rate 24% Current capital gains tax rate 15% Marginal tax rate during retirement 12% • Capital gains tax rate during retirement = 0% !! Record the following items in the text box below. Show support for your work on your scratch paper in order to receive credit. Record the following items in the text box below. Show support for your work on your scratch paper in order to receive credit. Items to report: • After-tax return, in $, if Lydia organizes her business as a sole proprietorship • After-tax return, in $, if Lydia organizes her business as a C corporation • After-tax rate of return, in %, if Lydia decides to save for retirement using a Roth IRA After-tax rate of return, in %, if Lydia decides to save for retirement using a deductible IRA

Answer rating: 100% (QA)

If Lydia organizes her business as a sole proprietorship her business would become eligible for QBI ... View the full answer