Required Information

Problem $15-50($LO $15-3)($Static$)$

$[$The following information applles to the questions displayed below.$]$

Amanda would like to organize BAL as either an LLC $($taxed as a sole proprletorship$)$ or a C

corporation. In elther form, the entity is expected to generate an $8$ percent annual before$-$tax

return on a $$500,000$ investment. Amanda's marginal income tax rate is $37$ percent, and her

tax rate on qualified dividends and net capital gains is $20\%.$ Assume that BAL will distribute

half of its after$-$tax earnings every year as a dividend if it is formed as a C corporation. Assume

the income is not eligible for the QBI deduction. Further, when computing your answers,

include the self$-$employment tax $($use a $2\mathrm{.}9\%$ marginal rate for self$-$employment income

because Amanda has salary in excess of the wage base limit$)$ but not the additional Medicare

tax or the net investment income tax.

Problem $15-50$ Part b $($Static$)$

b$.$ What is the overall tax rate on BAL's income in the first year if BAL is organized as an LLC or as a C

corporation?

Note: Round Intermediate calculations to the nearest whole dollar. Round your final answers to $2$ decimal

places.

Answer is complete but not entirely correct.