Sandra would like to organize LAB as either an LLC (taxed as a sole proprietorship) or...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Sandra would like to organize LAB as either an LLC (taxed as a sole proprietorship) or a C corporation. In either form, the entity is expected to generate an 10 percent annual before-tax return on a $540,000 investment. Sandra's marginal income tax rate is 37 percent, and her tax rate on dividends and capital gains is 23.8 percent (including the 3.8 percent net investment income tax). If Sandra organizes LAB as an LLC, she will be required to pay an additional 2.9 percent for self-employment tax and an additional 0.9 percent for the additional Medicare tax. LAB's income is not qualified business income (QBI) so Sandra is not allowed to claim the QBI deduction. Assume that LAB will distribute all of its after-tax earnings every year as a dividend if it is formed as a C corporation. (Round your intermediate computations to the nearest whole dollar amount.) a. How much cash after taxes would Sandra receive from her investment in the first year if LAB is organized as either an LLC or a C corporation? LLC C corporation After-tax cash flow b. What is the overall tax rate on LAB's income in the first year if LAB is organized as an LLC or as a C corporation? (Round your final answers to 2 decimal places.) LLC C corporation Overall Tax Rate % % Sandra would like to organize LAB as either an LLC (taxed as a sole proprietorship) or a C corporation. In either form, the entity is expected to generate an 10 percent annual before-tax return on a $540,000 investment. Sandra's marginal income tax rate is 37 percent, and her tax rate on dividends and capital gains is 23.8 percent (including the 3.8 percent net investment income tax). If Sandra organizes LAB as an LLC, she will be required to pay an additional 2.9 percent for self-employment tax and an additional 0.9 percent for the additional Medicare tax. LAB's income is not qualified business income (QBI) so Sandra is not allowed to claim the QBI deduction. Assume that LAB will distribute all of its after-tax earnings every year as a dividend if it is formed as a C corporation. (Round your intermediate computations to the nearest whole dollar amount.) a. How much cash after taxes would Sandra receive from her investment in the first year if LAB is organized as either an LLC or a C corporation? LLC C corporation After-tax cash flow b. What is the overall tax rate on LAB's income in the first year if LAB is organized as an LLC or as a C corporation? (Round your final answers to 2 decimal places.) LLC C corporation Overall Tax Rate % %
Expert Answer:
Answer rating: 100% (QA)
a AfterTax Cash Flow LLC Calculate the beforetax return on the investment Annual beforetax return 10 ... View the full answer
Related Book For
Essentials Of Federal Taxation 2019
ISBN: 9781260190045
10th Edition
Authors: Brian Spilker, Benjamin Ayers, John Robinson, Edmund Outslay, Ronald Worsham, John Barrick, Connie Weaver
Posted Date:
Students also viewed these accounting questions
-
Sandra would like to organize LAB as either an LLC (taxed as a sole proprietorship) or a C corporation. In either form, the entity is expected to generate an 11 percent annual before-tax return on a...
-
Compare and Contrast the story "Sleepy Hollow" with the Tim Burton film
-
Sandra would like to organize BAL as either an LLC (taxed as a sole proprietorship) or a C corporation. In either form, the entity is expected to generate an 8 percent annual before-tax return on a...
-
Which type of Organizational Model put the MOST emphasis on establishing MORALE and AUTONOMY O a. Hierarchical style Model b. O c. O d. Flat Management (Holocracy) Model Multi-divisional style Model...
-
Seguin Paper Products Corporation produces paper cups using two production departments, printing and forming. Beginning balances and printing department data for 2011 follow. 1. Seguin Paper Products...
-
How many of the following are legal declarations? A. One B. Two C. Three D. Four E. Five F. Six public void greek() { [][]String alpha; [] String beta; String [] [] gamma; String[] delta[]; String...
-
This appeal involves the validity of a will executed in contravention of an earlier contract to make mutual wills. A husband and wife signed a contract to make mutual wills and then executed those...
-
Trevor Price bought 10-year bonds issued by Harvest Foods five years ago for $936.05. The bonds make semiannual coupon payments at a rate of 8.4 percent. If the current price of the bonds is...
-
Lab-created diamonds have become an alternative to traditionally mined diamonds. There are concerns, however, that these artificial diamonds may undermine diamond values and the reputation of natural...
-
Campbell Manufacturing Company (CMC) was started when it acquired $80,000 by issuing common stock. During the first year of operations, the company incurred specifically identifiable product costs...
-
Arthur's nephew, Tom, has always been Arthur's favorite. Arthur has always thought of him as a son. Tom has worked closely with Arthur at Bell's Animal Care Center and is considered by Arthur to be a...
-
what is investment banking & investment bank ?
-
If you eat 2 extra crispy chicken breasts and one spicy crispy breast, you will consume 1440 calories. If you eat 1 extra crispy chicken breast and 2 spicy crispt chicken breasts, you will consume...
-
A broker-dealer must establish information barriers between which two departments? give reasons
-
What is the molecular structure and causative agent behind the formation of a thymine dimer in DNA?
-
function named exampleFour, that will have 2 input parameters. if second param is a part of the first one -- reutrn the last letter of first param if second param is not a part of the first one --...
-
[24pts] Let f(x) = 2x+4 and g(x) = 3x + 6. a) [4pts] Are f and g linear functions? If so, what are their slopes? b) [4pts] Find a formula for f(g(x)) c) [4pts] Find a formula for g(f(x)) d) [4pts]...
-
In a system with light damping (c < cc), the period of vibration is commonly defined as the time interval d = 2/d corresponding to two successive points where the displacement-time curve touches one...
-
Lina purchased a new car for use in her business during 2018. The auto was the only business asset she purchased during the year and her business was extremely profitable. Calculate her maximum...
-
George (age 42 at year-end) has been contributing to a traditional IRA for years (all deductible contributions) and his IRA is now worth $25,000. He is planning on transferring (or rolling over) the...
-
Last year, JL Corporations tax liability was $500,000. For the current year, JL Corporation reported the following taxable income at the end of its first, second, and third quarters (see table...
-
A researcher measured heart rate \((x)\) and oxygen uptake \((y)\) for one person under varying exercise conditions. He wishes to determine if heart rate, which is easier to measure, can be used to...
-
A researcher is investigating the relationship between yield of potatoes \((y)\) and level of fertilizer \((x\).\() She divides a eld into eight plots of equal\) size and applied fertilizer at a di...
-
The Police Department is interested in determining the e ect of alcohol consumption on driving performance. Twelve male drivers of similar weight, age, and driving experience were randomly assigned...
Study smarter with the SolutionInn App