At the beginning of the year, Mr. Lanier put $50,000 cash into Investment X. At the end of the year, he received a check for $2,800, representing his annual return on the investment. Mr. Lanier's marginal tax rate on ordinary income is 37 percent. However, his return on Investment X is a capital gain taxed at 20 percent. At the beginning of the year, Mr. Lanier could have invested his $50,000 in Business Z with an 8 percent annual return. However, this return would have been ordinary income rather than capital gain. Required: a. Considering the fact that Mr. Lanier could have invested in Business Z, how much implicit tax did he pay with respect to Investment X? b. Did Mr. Lanier make the correct decision by putting his $50,000 into Investment X instead of Business Z?

At the beginning of the year, Mr. Lanier put $50,000 cash into Investment X. At the end of the year, he received a check for $2,800, representing his annual return on the investment. Mr. Lanier's marginal tax rate on ordinary income is 37 percent. However, his return on Investment X is a capital gain taxed at 20 percent. At the beginning of the year, Mr. Lanier could have invested his $50,000 in Business Z with an 8 percent annual return. However, this return would have been ordinary income rather than capital gain. Required: a. Considering the fact that Mr. Lanier could have invested in Business Z, how much implicit tax did he pay with respect to Investment X? b. Did Mr. Lanier make the correct decision by putting his $50,000 into Investment X instead of Business Z?

SWFT Comprehensive Vol 2020

43rd Edition

ISBN:9780357391723

Author:Maloney

Publisher:Maloney

Chapter11: Invest Or Losses

Section: Chapter Questions

Problem 39P

See similar textbooks

Related questions

Q: Draw ALL products of the following NH + H2O -->

A: Approach to solving the question: Detailed explanation: Examples: Key references:

Q: Yuduryhej rjj

A: feel free to ask me any question within my capacity and I'm willing to help.

Q: EX.09.14

A: Meaning of Capital Expenditure: Capital expenditures (CapEx) are funds used by a company to acquire,…

Q: Define and expain

A: Detailed Explanation of Nursing1. Patient Care:Direct Care: Nurses provide hands-on care to…

Q: In which document would you find the MD&A? O A. Form 8-K O B. Form 10-K O C. Both A and B O D.…

A: Paid-in Capital Paid-in capital is that the total quantity cash equivalents contributed to a company…

Q: E12.8

A: Treasury stock refers to a method used by the organization to repurchase the issued stock. It is…

Q: Question 25

A: A theory that helps to compute the present or future value of the cash flows is term as the TVM…

Q: Number 33

A: 1)

Q: What is the after announcment? This is from question a.

A: Debt Value = $2,700,000Current Debt-to-equity ratio = 30%Increased Debt-to-equity ratio = 50%EBIT =…

Q: How to calculate PMT, P/Y and C/Y

A: As per the given information: The time value of money concept states that earlier receipts are more…

Q: In providing accounting services to small businesses, you encounter the following situations.…

A: Answer:-Journal entry:- The act of maintaining or creating the records of any transactions, whether…

Q: whats 1100+90

A: The question was a simple arithmetic problem that required adding two numbers together. In this…

Q: Describe the events that correspond to the following two journal entries:Questions For Review of Key…

A: An Accounting event is a transaction that is recorded in the books of accounts of the company. There…

Q: Topic is Interests If A(t) = 100(1.1)t Find: a. i5 b. i10 Show complete solution with explanatio

Q: x8=h 0817×1= h

A: y= 4x + 180 y= 8x To solve above equations to find the value of x and y

Q: Answer to Part C = 42250

A: Given, Maturity =10 Years Market interest rate: 6% Stated interest rate = 5% Price of the bond is…

Q: E12.17

A: Retained earnings refer to the amount earned by the organization till the date of preparation of the…

Q: ou put 491-28 why is it 28 and not - 175?? Can you explain that please?

A: Most of the credit card companies compute their finance charges based on average daily balance.…

Q: E12.4

A: Journal Entry: Journal entry is the act of keeping records of transactions in an accounting journal.…

Q: was due inancial State nc. should report

Q: When I type in that calculation is comes out as "0" =PMT(B2/12,B3*12,-B1)

A: PMT function is a financial function of excel. It is used to compute the periodic payment amount.…

Q: Please describe a scenario that is modeled by the following scenario: .0574 (12-18) 1+ 12 385 145130…

A: The scenario represented using the given computation is the future value of the annuity.

Question

am. 02.

At the beginning of the year, Mr. Lanier put $50,000 cash into Investment X. At the end of the
year, he received a check for $2,800, representing his annual return on the investment. Mr.
Lanier's marginal tax rate on ordinary income is 37 percent. However, his return on Investment X
is a capital gain taxed at 20 percent. At the beginning of the year, Mr. Lanier could have invested
his $50,000 in Business Z with an 8 percent annual return. However, this return would have been
ordinary income rather than capital gain.
Required:
a. Considering the fact that Mr. Lanier could have invested in Business Z, how much implicit tax
did he pay with respect to Investment X?
b. Did Mr. Lanier make the correct decision by putting his $50,000 into Investment X instead of
Business Z?
Complete this question by entering your answers in the tabs below.
Required A Required B
Considering the fact that Mr. Lanier could have invested in Business Z, how much implicit tax did he pa
Investment X?
Implicit tax paid
$
0
< Required A
Required B
>

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1: Capital gain taxation

VIEW

Step 2: Calculation

VIEW

Solution

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

At the beginning of the year, Mr. Lanier put $50,000 cash into Investment X. At the end of the year, he received a check for $2,800, representing his annual return on the investment. Mr. Lanier’s marginal tax rate on ordinary income is 37 percent. However, his return on Investment X is a capital gain taxed at 20 percent. At the beginning of the year, Mr. Lanier could have invested his $50,000 in Business Z with an 8 percent annual return. However, this return would have been ordinary income rather than capital gain. Required: Considering the fact that Mr. Lanier could have invested in Business Z, how much implicit tax did he pay with respect to Investment X? Did Mr. Lanier make the correct decision by putting his $50,000 into Investment X instead of Business Z?
"At the beginning of the year, Mr. Lanier put $50,000 cash into Investment X. At the end of the year, he received a check for $2,800, representing his annual return on the investment. Mr. Lanier’s marginal tax rate on ordinary income is 37 percent. However, his return on Investment X is a capital gain taxed at 20 percent. Compute the value of the preferential rate to Mr. Lanier. "
Don't use Ai
Samuel Jenkins made two investments; the first was 13 months ago and the second was two months ago. He just sold both investments and has a capital gain of $10,000 on each. If Samuel is single and has taxable income of $40,000, what will be the amount of capital gains tax on each investment? See Capital Gains table and Taxable income rate table. Investment 1: held 13 months: whats the capital gains tax? Investment 2: held 2 months: Whats the capital gains tax?
Thoren has the following items for the year: $4,000 of short-term capital gain, $5,000 of 0%/15%/20% long-term capital gain, and $1,500 of 28% capital loss. Which of the following is correct? a.The $1,500 loss will first be offset by the $5,000 long-term gain. b.The taxpayer will have a net short-term capital loss. c.The $1,500 loss will first be offset by the $4,000 short-term gain. d.The $4,000 short-term gain will first be offset by the $5,000 long-term gain.
Samuel Jenkins made two invstments, the first was 13 months ago and the second was two months ago. He just sold both investments and has a capital gain of $3,000 on each. If Samuel is in the 28 percent tax bracket, what will be the amount of capital gains tax on each investment?
Taxpayer Y, who has a 30 percent marginal tax rate, invested $65,000 in a bond that pays 8 percent annual interest. Compute Y’s annual net cash flow from this investment assuming that a. The interest is tax-exempt income.b. The interest is taxable income.
Hank, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late December, he performed $27,000 of legal services for a client. Hank typically requires his clients to pay his bills immediately upon receipt. Assume his marginal tax rate is 32 percent this year and will be 35 percent next year, and that he can earn an after-tax rate of return of 12 percent on his investments. Use Exhibit 3.1. What is the after-tax income if Hank sends his client the bill in January? What is the after-tax income if Hank expects his marginal tax rate to be 24 percent next year and sends his client the bill in January?
Deon made $30.000 in taxable income last year. Suppose the income tax rate is 15% for the first $8500 plus 17% for the amount over $8500. How much must Deon pay in income tax for last year?
Kim's net worth at the beginning of the year is $250,000. Across the year she earns $60,000 before tax and pays tax of $15,000, spends $30,000, and makes a capital loss on her assets of $10,000. By the end of the year, her net worth is
Colby's gross income was $93,000last year. If he had $1646.92withheld for federal income taxfrom each of his monthly paychecks,what percentage of his gross income
Isabel, a calendar year tax payer, uses the cash method of accounting for her soul proprietor ship. In late December she received a $60,000 bill from her accountant for consulting services related to her small business. Isabel can pay the $60,000 bill anytime before January 30 of next year without penalty. Assume her marginal tax rate is 37 percent this year and next year, and that she can earn an after-tax rate of return of 8 percent on her investments. What is the after-tax cost if Isabel pays the $60,000 bill in January?