3Jake started a trucking business. He wants to know the tax ramifications for the various business entities. His projections indicate the following for his new business: Year Taxable Income/(Loss) Distribution to OwnersYearTaxable income/ (loss)Distribution to owners1($50,000)$02($20,000)$10,0003+$75,000$20,000 Jake expects to be in a marginal tax bracket of 30% for each year. Assume the corporate rate is 21%. What are the tax and nontax advantages and disadvantages of a flow-through entity and corporate entity? Which entity would be the best option for Jake?

Tax ramification refers to the tax implications. Flow through entity is the form of a business…

Answered: ake started a trucking business. He…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Jake started a trucking business. He wants to know the tax ramifications for the various business entities. His projections indicate the following for his new business: Year Taxable Income/(Loss) Distribution to Owners

Year	Taxable income/ (loss)	Distribution to owners
1	($50,000)	$0
2	($20,000)	$10,000
3+	$75,000	$20,000

Jake expects to be in a marginal tax bracket of 30% for each year. Assume the corporate rate is 21%.

What are the tax and nontax advantages and disadvantages of a flow-through entity and corporate entity? Which entity would be the best option for Jake?

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