Logan, a 50-percent shareholder in Military Gear Incorporated (MG), is comparing the tax consequences of losses from C corporations with losses from S corporations. Assume MG has a $116,000 tax loss for the year, Logan's tax basis in his MG stock was $158,000 at the beginning of the year, and he received $83,000 ordinary income from other sources during the year. Assuming Logan's marginal tax rate is 24 percent, how much more tax will Logan pay currently if MG is a C corporation

Logan, a 50-percent shareholder in Military Gear Incorporated (MG), is comparing the tax consequences of losses from C corporations with losses from S corporations. Assume MG has a $116,000 tax loss for the year, Logan's tax basis in his MG stock was $158,000 at the beginning of the year, and he received $83,000 ordinary income from other sources during the year. Assuming Logan's marginal tax rate is 24 percent, how much more tax will Logan pay currently if MG is a C corporation

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Hello. I need help trying to figure out this
problem. The answer to this problem is D.
19,920 but can you please explain why that's
the correct answer? I would appreciate it.
Logan, a 50-percent shareholder in Military
Gear Incorporated (MG), is comparing the tax
consequences of losses from C corporations
with losses from S corporations. Assume MG
has a $116,000 tax loss for the year, Logan's
tax basis in his MG stock was $158,000 at the
beginning of the year, and he received
$83,000 ordinary income from other sources
during the year. Assuming Logan's marginal
tax rate is 24 percent, how much more tax will
Logan pay currently if MG is a C corporation
compared to the tax he would pay if it were
an S corporation?
A) $0
B) 6,000
C) 13,920
D) 19,920

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