Suppose a taxpayer invests $ 100,000 in a partnership. The taxpayer faces a personal tax rate of

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Suppose a taxpayer invests $ 100,000 in a partnership. The taxpayer faces a personal tax rate of 70% and a tax rate on capital gains of 28%. In the first year, the partnership spends the entire $ 100,000 on research, which the taxpayer can claim as a deduction against her other income. In the second year, the partnership sells the developed technology, and the taxpayer’s share of the sale price is $ 50,000, which is taxed as a capital gain. (Ignore the time value of money in your answer.)
a. What is the pretax rate of return to the taxpayer?
b. What is the after tax rate of return to the taxpayer? Partnership
A legal form of business operation between two or more individuals who share management and profits. A Written agreement between two or more individuals who join as partners to form and carry on a for-profit business. Among other things, it states...
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Taxes And Business Strategy A Planning Approach

ISBN: 9780132752671

5th Edition

Authors: Myron Scholes, Mark Wolfson, Merle Erickson, Michelle Hanlon

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