Required information [The following information applies to the questions displayed below.] Amanda would like to organize BAL as either an LLC (taxed as a sole proprietorship) or a C corporation. In either form, the entity is expected to generate an 8 percent annual before-tax return on a $500,000 investment. Amanda's marginal income tax rate is 37 percent, and her tax rate on qualified dividends and net capital gains is 20%. Assume that BAL will distribute half of its after-tax earnings every year as a dividend if it is formed as a C corporation. Assume the income is not eligible for the QBI deduction. Further, when computing your answers, include the self-employment tax (use a 2.9% marginal rate for self-employment income because Amanda has salary over $147,000 from her employer) but not the additional Medicare tax or the net investment income tax. How much cash after taxes would Amanda receive from her investment in the first year if BAL is organized as an LLC? What if BAL ganized as a C corporation?
Required information [The following information applies to the questions displayed below.] Amanda would like to organize BAL as either an LLC (taxed as a sole proprietorship) or a C corporation. In either form, the entity is expected to generate an 8 percent annual before-tax return on a $500,000 investment. Amanda's marginal income tax rate is 37 percent, and her tax rate on qualified dividends and net capital gains is 20%. Assume that BAL will distribute half of its after-tax earnings every year as a dividend if it is formed as a C corporation. Assume the income is not eligible for the QBI deduction. Further, when computing your answers, include the self-employment tax (use a 2.9% marginal rate for self-employment income because Amanda has salary over $147,000 from her employer) but not the additional Medicare tax or the net investment income tax. How much cash after taxes would Amanda receive from her investment in the first year if BAL is organized as an LLC? What if BAL ganized as a C corporation?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings of a partner, etc.
Question
a)
![Required information
[The following information applies to the questions displayed below.]
Amanda would like to organize BAL as either an LLC (taxed as a sole proprietorship) or a C corporation. In either form, the
entity is expected to generate an 8 percent annual before-tax return on a $500,000 investment. Amanda's marginal
income tax rate is 37 percent, and her tax rate on qualified dividends and net capital gains is 20%. Assume that BAL will
distribute half of its after-tax earnings every year as a dividend if it is formed as a C corporation. Assume the income is not
eligible for the QBI deduction. Further, when computing your answers, include the self-employment tax (use a 2.9%
marginal rate for self-employment income because Amanda has salary over $147,000 from her employer) but not the
additional Medicare tax or the net investment income tax.
a. How much cash after taxes would Amanda receive from her investment in the first year if BAL is organized as an LLC? What if BAL is
organized as a C corporation?
Note: Round intermediate calculations and your final answers to the nearest whole dollar.
LLC
C corporation
After-tax cash flow](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff2e55cf4-6ca9-4406-b29d-a1b66042d5aa%2F4f0d4ef3-be7d-4ebd-96e1-7de5db167f4c%2F300rxdv_processed.png&w=3840&q=75)
Transcribed Image Text:Required information
[The following information applies to the questions displayed below.]
Amanda would like to organize BAL as either an LLC (taxed as a sole proprietorship) or a C corporation. In either form, the
entity is expected to generate an 8 percent annual before-tax return on a $500,000 investment. Amanda's marginal
income tax rate is 37 percent, and her tax rate on qualified dividends and net capital gains is 20%. Assume that BAL will
distribute half of its after-tax earnings every year as a dividend if it is formed as a C corporation. Assume the income is not
eligible for the QBI deduction. Further, when computing your answers, include the self-employment tax (use a 2.9%
marginal rate for self-employment income because Amanda has salary over $147,000 from her employer) but not the
additional Medicare tax or the net investment income tax.
a. How much cash after taxes would Amanda receive from her investment in the first year if BAL is organized as an LLC? What if BAL is
organized as a C corporation?
Note: Round intermediate calculations and your final answers to the nearest whole dollar.
LLC
C corporation
After-tax cash flow
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