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.

a. Assume the corporation expects to generate $500,000 of income next year, and has a 34 percent marginal 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.)

b. 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 39.6 percent, calculate the tax savings associated with the current year operating loss.