please answer within 30 minutes. Jake started a trucking business. He wants to knowthe tax ramifications for the various business entities.His projections indicate the following for his newbusiness: Year Taxable Income/(Loss) Distribution toOwnersYearTaxable income/ (loss)1($50,000)$02($20,000)$10,0003+$75,000$20,000Jake expects to be in a marginal tax bracket of 30%for each year. Assume the corporate rate is 21%.Distribution to ownersWhat are the tax and nontax advantages anddisadvantages of a flow-through entity and corporateentity? Which entity would be the best option forJake?

A flow through business entity refers to a form of business entity in which whatever is earned is…

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

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

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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Concept explainers

Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.

Question

please answer within 30 minutes.

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)
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%.
Distribution to owners
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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