Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Required information Problem 15-46 (LO 15-3) [The following information applies to the questions displayed below.] Amanda would like to organize BAL as either an LLC

Required information

Problem 15-46 (LO 15-3)

[The following information applies to the questions displayed below.]

Amanda would like to organize BAL as either an LLC (taxed as a sole proprietorship) or a C corporation. In either form, the entity is expected to generate an 8 percent annual before-tax return on a $500,000 investment. Amandas marginal income tax rate is 37 percent and her tax rate on dividends and capital gains is 23.8 percent (including the 3.8 percent net investment income tax). If Amanda organizes BAL as an LLC, she will be required to pay an additional 2.9 percent for self-employment tax and an additional 0.9 percent for the additional Medicare tax. Also, she is eligible to claim a full deduction for qualified business income on BALs income. Assume that BAL will distribute half of its after-tax earnings every year as a dividend if it is formed as a C corporation. (Round your intermediate computations to the nearest whole dollar amount.)

Problem 15-46 Part a

a. How much cash after taxes would Amanda receive from her investment in the first year if BAL is organized as either an LLC or a C corporation?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting Theory And Analysis Text And Cases

Authors: Richard G. Schroeder, Myrtle W. Clark, Jack M. Cathey

9th Edition

9780470128817

More Books

Students also viewed these Accounting questions

Question

Describe several uses for a position description.

Answered: 1 week ago