TPC $16-05($Static$)[$LO $16-8]$

Ms$.$ Barstow purchased a limited interest in Quinnel Partnership in $2024.$ Her share of the partnership$$s $2024$ business loss was $$5,000.$ Unfortunately, Ms$.$ Barstow couldn't deduct this loss because she had no passive activity income, so she is carrying it forward into $2025.$ Quinnel Partnership projects that it will operate at breakeven $($no income or loss$)$ for several years. However, Ms$.$ Barstow believes that her partnership interest is a solid long$-$term investment, and she has no plans to sell it$.$

On January $1,2025,$ Ms$.$ Barstow must decide between two new investments that are comparable in terms of risk and liquidity. She could invest $$100,000$ in TNB Limited Partnership, and her share of the partnership$$s $2025$ business income would be $$8,000.$ Alternatively, she could invest $$100,000$ in a high$-$yield bond fund that promises a $10$ percent return. $($Ms$.$ Barstow would receive $$10,000$ interest income in $2025.)$ Use Tax rates for capital gains and qualified dividends.

Required:

a$-1.$ Compute the after$-$tax cash flow and after$-$tax return of investing in TNB Limited Partnership and the high yield bond fund assuming Ms$.$ Barstow has a $24$ percent marginal tax rate on ordinary income and is not subject to the Medicare contribution tax.

a$-2.$ Which investment generates a higher after$-$tax return for $2025?$

b$-1.$ Compute the after$-$tax cash flow and after$-$tax return of investing in TNB Limited Partnership and the high yield bond fund assuming Ms$.$ Barstow has a $37$ percent marginal tax rate on ordinary income and is subject to the Medicare contribution tax on either the $$8,000$ partnership income or the $$10,000$ interest income.

b$-2.$ Which investment generates a higher after$-$tax return for $2025?$