! Required information [The following information applies to the questions displayed below.] Amanda 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 $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 2.9% marginal rate for self-employment income because Amanda has salary over $147,000 from her employer) but not the additional Medicare tax or the net investment income tax. a. How much cash after taxes would Amanda receive from her investment in the first year if BAL is organized as an LLC? What if BAL is organized as a C corporation? Note: Round intermediate calculations and your final answers to the nearest whole dollar. LLC C corporation After-tax cash flow
! Required information [The following information applies to the questions displayed below.] Amanda 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 $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 2.9% marginal rate for self-employment income because Amanda has salary over $147,000 from her employer) but not the additional Medicare tax or the net investment income tax. a. How much cash after taxes would Amanda receive from her investment in the first year if BAL is organized as an LLC? What if BAL is organized as a C corporation? Note: Round intermediate calculations and your final answers to the nearest whole dollar. LLC C corporation After-tax cash flow
Chapter13: Choice Of Business Entity—general Tax And Nontax Factors/formation
Section: Chapter Questions
Problem 37P
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Required information
[The following information applies to the questions displayed below.]
Amanda 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 $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 2.9%
marginal rate for self-employment income because Amanda has salary over $147,000 from her employer) but not the
additional Medicare tax or the net investment income tax.
a. How much cash after taxes would Amanda receive from her investment in the first year if BAL is organized as an LLC? What if BAL is
organized as a C corporation?
Note: Round intermediate calculations and your final answers to the nearest whole dollar.
LLC
C corporation
After-tax cash flow](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F02b105dc-6330-4951-baf2-8dbb5e17da5d%2F3841fd95-b362-47b0-bb19-56c9f15a7c2c%2Fjhp1nql_processed.png&w=3840&q=75)
Transcribed Image Text:!
Required information
[The following information applies to the questions displayed below.]
Amanda 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 $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 2.9%
marginal rate for self-employment income because Amanda has salary over $147,000 from her employer) but not the
additional Medicare tax or the net investment income tax.
a. How much cash after taxes would Amanda receive from her investment in the first year if BAL is organized as an LLC? What if BAL is
organized as a C corporation?
Note: Round intermediate calculations and your final answers to the nearest whole dollar.
LLC
C corporation
After-tax cash flow
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