Grant and Marvin organized a new business as a corporation in which they own equal interests. The new business generated a $65,000 operating loss for the year. Use Appendix A.b. Now assume that the corporation makes an election under Subchapter S to be treated as a passthrough entity. If Grant's marginaltax rate is 35 percent and Marvin's marginal tax rate is 37 percent, calculate the tax savings associated with the current year operating loss. Assume the basis and excess business loss limitations do not apply. * I only need Requirement B to be solved APPENDIXAPresent Value of $1Periods3%4%5%6%7%8%9%1.971962.952.943.935.926917.943925.907.890.873.857.8423.915.889.864.840.816.794.772.888.855.823.792.763.735708.863.822.784.747.713.681.6506..837.790.746.705.666.630.596.813.760.711665.623.5835478..789.731.677.627.582.540.5029..766.703.645.592.544.50046010.744.676.614.558.508.46342211.722.650.585.527475429.38812.701.625.557497.444.397.35613.681.601.53046941536832614.661.577.505442.38834029915.642.555.481417.362.315.27516.623.534458.394.339.292.25217.605.513436371.317.27023118.587494416350.296.250.21219.570475.396.331.277.232.19420.554456.377312.258.215.178Periods10%11%12%13%14%15%20%.909.901.893.885.877.870.833.826.812.797783.769.756.694751.731.712.693.675.658.5794.683.659.636.613.592.572482.621.593.567543.5194974026.564.535.507480456432.3357..513482452425400376.2798467434404.376351327.233.424391.361333308284.19410386.352.322295270.247.16211350317287.261237H 215.135 Grant and Marvin organized a new business as a corporation in which they own equal interests. The new business generated a$65,000 operating loss for the year. Use Appendix A.Required:a. Assume the corporation expects to generate $500,000 of income next year and has a 21 percent tax rate. Calculate the net presentvalue of the future tax savings associated with the current year operating loss, using a 4 percent discount rate. (Do not roundintermediate computations. Round your final answer to the nearest whole dollar amount.)NPV of future tax savings2$13,125b. Now assume that the corporation makes an election under Subchapter S to be treated as a passthrough entity. If Grant's marginaltax rate is 35 percent and Marvin's marginal tax rate is 37 percent, calculate the tax savings associated with the current yearoperating loss. Assume the basis and excess business loss limitations do not apply.Current year tax savings

Net Present Value: Net Present Value is the difference between the present value of cash inflows…

ed as a passthrough entity. If Grant's marginal tax rate is 35 percent and Marvin's marginal tax rate is 37 percent, calculate the tax savings associated with the current year operating loss. Assume the basis and excess business loss

ed as a passthrough entity. If Grant's marginal tax rate is 35 percent and Marvin's marginal tax rate is 37 percent, calculate the tax savings associated with the current year operating loss. Assume the basis and excess business loss

Income Tax Fundamentals 2020

38th Edition

ISBN:9780357391129

Author:WHITTENBURG

Publisher:WHITTENBURG

Chapter11: The Corporate Income Tax

Section: Chapter Questions

Problem 11MCQ

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