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Joe sells his shares in BHP and buys shares in a tech stock company. Are these primary or secondary market transactions? Explain why. In what
- Joe sells his shares in BHP and buys shares in a tech stock company. Are these primary or secondary market transactions? Explain why.
- In what way is the existence of well-developed secondary markets important to the functioning of the primary markets within the financial system? (Marks 2 + 2 =4)
- Distinguish between a coupon security and a discount security. Give an example of each. (Marks 2)
- Riley and Bailey are planning to start a new business together. They are expecting annual taxable income of $250,000 from their business, but they are concerned about the expected tax burden. They know that the corporate tax rate is 30% and individual tax is payable as per the following table:
Taxable income | Tax on this income |
0 - $18,200 | Nil |
$18,201 - $37,000 | 19c for each $1 over $18,200 |
$37,001 - $80,000 | $3,572 plus 32.5c for each $1 over $37,000 |
$80,001 - $180,000 | $17,547 plus 37c for each $1 over $80,000 |
$180,001 and over | $54,547 plus 45c for each $1 over $180,000 |
They are seeking your advice on the tax implications of the two following forms of business structures and have requested you to calculate the tax payable under each of them:
- Partnership - Riley 30% and Bailey 70%.
- Corporation.
- Which form of business would you recommend to Riley and Bailey and why?
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