Grant and Marvin organized a new business as a corporation in which they own equal interests. The new business generated a $65,000 operating loss for the year. Use Appendix A.

1. Assume the corporation expects to generate $500,000 of income next year and has a 21 percent tax rate. Calculate the net present value of the future tax savings associated with the current year operating loss, using a 4 percent discount rate. (Do not round intermediate computations. Round your final answer to the nearest whole dollar amount.)

2. Now assume that the corporation makes an election under Subchapter S to be treated as a passthrough entity. If Grants marginal tax rate is 35 percent and Marvins marginal tax rate is 37 percent, calculate the tax savings associated with the current year operating loss. Assume the excess business loss limitation does not apply.

Present Value of $1 971 952 907 943 890 840 935 926 857 842 855 822 823 763 708 650 863 837 789 747 705 681 623 582 583 540 731 547 677 645 627 676 650 558 527 497 469 442 508 475 463 429 422 .585 557 681 661 642 623 601 326 362 275 534 458 436 292 270 587 570 350 475 277 258 232 194 10% 11% 12% 13% 14% 15% .901 893 885 783 693 877 769 675 870 756 658 833 579 402 826 731 659 593 .535 482 434 391 683 621 567 507 452 543 497 456 335 467 424 376 327 376 351 233 361 322 287 257 261 237 187 163 093 078 232 160 239 183 160 107 081 061 045 098 087 083 073 124 026