1,

Whirlwind Cycles is owned 100% by Daniel, a single taxpayer. Both Whirlwind Cycles and Daniel use the cash method of accounting for tax purposes. The business incurred the following items of income and expense in the year 2016:

Cash Sales $150,000

Interest received from City of Eugene Bonds 3,000

Cost of Goods Sold (assume cash

paid in 2016) 45,000

Cash payments for 2016 utilities 3,500

Cash payments for 2016 rent ($1,000 per month) 12,000

Tax depreciation 35,000

Cash contribution to the Democratic Party

of Oregon (not deductible for tax purposes) 1,000

On 1/1/2015 (last year) Whirlwind Cycles purchased a 60-month zero coupon bond with a 5% yield and a $20,000 maturity value for $15,670 (compounded annually).

Daniels marginal tax rate is 33% before any profits from the business are considered.

Calculate Daniels 2016 after-tax cash flows from the business assuming the business is organized as a C Corporation and the corporation pays all of its after-tax cash flows to Daniel as a dividend.