Lydia is starting a new business. She expects to earn a before-tax rate of return equal...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Lydia is starting a new business. She expects to earn a before-tax rate of return equal to 8% and she plans to operate the business for a minimum of 3 years. Lydia's business operates in an industry that is eligible for the QBI deduction. Lydia makes an initial investment of $50,000 in the business at the beginning of 2020. Lydia is also starting to save for her retirement. Lydia is considering investing in the following savings vehicles for a 40-year investment period: Roth IRA, investment amount $6,000, expected before tax rate of return 7% Deductible IRA, investment amount $4,000, expected before tax rate of return = 8% Lydia has the following tax rates: • Current marginal tax rate 24% Current capital gains tax rate 15% Marginal tax rate during retirement 12% • Capital gains tax rate during retirement = 0% !! Record the following items in the text box below. Show support for your work on your scratch paper in order to receive credit. Record the following items in the text box below. Show support for your work on your scratch paper in order to receive credit. Items to report: • After-tax return, in $, if Lydia organizes her business as a sole proprietorship • After-tax return, in $, if Lydia organizes her business as a C corporation • After-tax rate of return, in %, if Lydia decides to save for retirement using a Roth IRA After-tax rate of return, in %, if Lydia decides to save for retirement using a deductible IRA Lydia is starting a new business. She expects to earn a before-tax rate of return equal to 8% and she plans to operate the business for a minimum of 3 years. Lydia's business operates in an industry that is eligible for the QBI deduction. Lydia makes an initial investment of $50,000 in the business at the beginning of 2020. Lydia is also starting to save for her retirement. Lydia is considering investing in the following savings vehicles for a 40-year investment period: Roth IRA, investment amount $6,000, expected before tax rate of return 7% Deductible IRA, investment amount $4,000, expected before tax rate of return = 8% Lydia has the following tax rates: • Current marginal tax rate 24% Current capital gains tax rate 15% Marginal tax rate during retirement 12% • Capital gains tax rate during retirement = 0% !! Record the following items in the text box below. Show support for your work on your scratch paper in order to receive credit. Record the following items in the text box below. Show support for your work on your scratch paper in order to receive credit. Items to report: • After-tax return, in $, if Lydia organizes her business as a sole proprietorship • After-tax return, in $, if Lydia organizes her business as a C corporation • After-tax rate of return, in %, if Lydia decides to save for retirement using a Roth IRA After-tax rate of return, in %, if Lydia decides to save for retirement using a deductible IRA
Expert Answer:
Answer rating: 100% (QA)
If Lydia organizes her business as a sole proprietorship her business would become eligible for QBI ... View the full answer
Related Book For
Posted Date:
Students also viewed these accounting questions
-
A quality improvement project was initiated in an industry that has seasonal demand for their product, coolers/ice chests, which are purchased/sold more frequently in the summer. The goal of the...
-
An investor is considering starting a new business whilst working with a local government as Accountant. The company would require GHS 500,000 of assets, and it would be financed entirely with common...
-
Manilow Corporation operates in an industry that has a high rate of bad debts. Before any year-end adjustments, the balance in Manilow's Accounts Receivable account was $555,000 and the Allowance for...
-
What characteristics do you think Jamie Oliver has that have helped make his various enterprises a success?
-
Consider the following returns for two investments, A and B, over the past four years: a. Which investment provides the higher return? b. Which investment provides less risk? c. Given a risk-free...
-
Ganados Globalization. After reading the chapters description of Ganados globalization process, how would you explain the distinctions between international, multinational, and global companies?
-
From your break-even chart for 45.1 (ii) calculate the profit or loss that will be made at levels of (i) 3,000 units; (ii) 10,000 units; (iii) 4,000 units; (iv) 7,000 units; (v) 8,500 units.
-
Classic Clothes is a retail organization in the Northeast that sells upscale clothing. Each year, store managers in consultation with their supervisors establish financial goals, and then a monthly...
-
Winston Corp. tiene cuentas por cobrar pendientes por un total de $6.5 millones al 31 de diciembre y ventas a crdito durante el ao de $10 millones. Tambin existe un saldo acreedor de $15,000 en la...
-
8.1 Create a one-way data table for profit at different levels of supplier contact in range B22:C33. Ensure that the price in cell C3 is $290 and the advertising budget in cell C5 is $35,000,000 (you...
-
A 120 a cpaotor conneced to an ac gent with an me obige of 16.0 Vand a eenty of 130.0 Ha Part A What s the rms curmnt in this out? Submit Reust Anr Provide Feedhack
-
The symbol of a simple unprefixed SI unit has been left off of each measurement in the table below. Fill in the missing unit symbols. the height of a typical room ceiling = 3. the mass of an apple =...
-
explain accounting transactions pertain to inter-company notes, show how the actual accounting procedures take place, Also, identify some of the issues that the accountant may face on the topics...
-
Consider an economy described by the following equations: Consumption function: Disposable Income: Taxes Transfers: Investment: Government spending: Net Exports: C=200+0.75"DI DI=Y-T T=1200 1=900 GE...
-
Solve the problem. Find the dimensions that produce the maximum floor area for a one-story house that is rectangular in shape and has a perimeter of 123 ft. Round to the nearest hundredth, if...
-
Financial data for Joel de Paris, Incorporated, for last year follow: Joel de Paris, Incorporated Assets Balance Sheet Beginning Balance Ending Balance Cash Accounts receivable Inventory Plant and...
-
NPV Birmingham Bolt, Inc. has been approached by one of its customers about producing 800,000 special-purpose parts for a new home product. The customer wants 100,000 parts per year for eight years....
-
Below is a sample of the data in the file NFLAttendance which contains the 32 teams in the National Football League, their conference affiliation, their division, and their average home attendance....
-
Suppose a consumer has preferences over two goods that can be represented by the quasi-linear utility function U(x, y) = 2x + y. The marginal utilities are MUx = 1/x and MUy = 1. a) Is the assumption...
-
Consider the production function Q = LK, with marginal products MPL = K and MPK = L. Suppose that the price of labor equals w and the price of capital equals r. Derive expressions for the input...
-
Samantha purchases food (F) and other goods (Y) with the utility function U = FY. Her income is 12. The price of a food is 2 and the price of other goods 1. a) How many units of food does she consume...
-
Rose Limited operates a small chain of retail shops that sell high-quality teas and coffees. Approximately half of sales are on credit. Abbreviated and unaudited financial statements are as follows:...
-
Presented below is a draft set of financial statements for Chips Limited. The following additional information is available: 1 Purchase invoices for goods received on 29 June 2016 amounting to 23,000...
-
Why are accounting rules needed when preparing financial statements?
Study smarter with the SolutionInn App