Loose Leaf for Principles of Taxation for Business and Investment Planning 2019 Edition

22nd Edition

ISBN: 9781260161472

Author: Sally Jones, Shelley C. Rhoades-Catanach

Publisher: McGraw-Hill Education

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Textbook Question

Chapter 15, Problem 1TPC

This year, Mr. Joss accepted a job with BL Inc. He intends to work for only eight years and then start his own business. He has two options for accumulating the money he will need for this business.

Option 1: He is eligible to participate in BL’s Section 401(k) plan and can afford to save $5,000 of his salary each year by diverting it to this plan. The plan earns 5 percent a year. Consequently, his plan balance in eight years will be $47,746 ($5,000 for eight years compounded at 5 percent).
Option 2: He can take his entire salary in cash, pay income tax, and save $3,600 ($5,000 less $1,400 tax) in an investment fund that earns 5 percent a year. Because the annual earnings are taxable, his savings in the fund will grow at only 3.6 percent a year. Consequently, his fund balance in eight years will be $32,702 ($3,600 for eight years compounded at 3.6 percent).

Assuming a constant 28 percent combined federal and state tax rate, which option results in the greatest after-tax cash for Mr. Joss to begin his business?

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Chapter 15, Problem 4RP

Chapter 15, Problem 2TPC

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Chapter 15 Solutions

Loose Leaf for Principles of Taxation for Business and Investment Planning 2019 Edition

Ch. 15 - Prob. 1QPD Ch. 15 - Prob. 2QPD Ch. 15 - Prob. 3QPD Ch. 15 - Discuss the practical reasons why the tax law...Ch. 15 - Prob. 5QPD Ch. 15 - Mr. Burnett owns 10 percent of the stock of ABC...Ch. 15 - This year, publicly held Corporation DF paid its...Ch. 15 - Mr. Zelig was recently promoted to an executive...Ch. 15 - Prob. 9QPD Ch. 15 - Prob. 10QPD

Ch. 15 - Prob. 11QPD Ch. 15 - Prob. 12QPD Ch. 15 - Prob. 13QPD Ch. 15 - Prob. 14QPD Ch. 15 - Greg Company agreed to pay Ms. Bilko 45,000...Ch. 15 - Trent Inc. needs an additional worker on a...Ch. 15 - Prob. 3AP Ch. 15 - Prob. 4AP Ch. 15 - Mr. and Mrs. Soon are the sole shareholders of SW...Ch. 15 - Prob. 6AP Ch. 15 - Mrs. Flay, age 57, participates in the group term...Ch. 15 - Mrs. Ellers corporate employer has a cafeteria...Ch. 15 - Mr. Nixon and Mr. Ryan are employed by HD Inc.,...Ch. 15 - Peet Company provides free on-site day care for...Ch. 15 - This year, Faro Inc., a calendar year taxpayer,...Ch. 15 - Prob. 12AP Ch. 15 - Prob. 13AP Ch. 15 - Prob. 14AP Ch. 15 - Refer to the facts in the preceding problem. Five...Ch. 15 - Prob. 16AP Ch. 15 - Prob. 17AP Ch. 15 - Prob. 18AP Ch. 15 - Prob. 19AP Ch. 15 - Prob. 20AP Ch. 15 - Prob. 21AP Ch. 15 - Prob. 22AP Ch. 15 - Prob. 23AP Ch. 15 - Prob. 24AP Ch. 15 - Prob. 25AP Ch. 15 - Prob. 26AP Ch. 15 - Prob. 27AP Ch. 15 - Refer to the facts in the preceding problem Assume...Ch. 15 - Prob. 29AP Ch. 15 - Prob. 30AP Ch. 15 - Prob. 31AP Ch. 15 - Prob. 32AP Ch. 15 - Prob. 33AP Ch. 15 - Prob. 34AP Ch. 15 - Prob. 35AP Ch. 15 - Prob. 36AP Ch. 15 - Prob. 37AP Ch. 15 - Prob. 38AP Ch. 15 - Prob. 39AP Ch. 15 - Prob. 40AP Ch. 15 - Prob. 41AP Ch. 15 - Prob. 1IRP Ch. 15 - Prob. 2IRP Ch. 15 - Prob. 3IRP Ch. 15 - Prob. 4IRP Ch. 15 - Prob. 5IRP Ch. 15 - Prob. 6IRP Ch. 15 - Prob. 7IRP Ch. 15 - Prob. 8IRP Ch. 15 - Prob. 9IRP Ch. 15 - Prob. 10IRP Ch. 15 - Prob. 11IRP Ch. 15 - Prob. 12IRP Ch. 15 - Prob. 13IRP Ch. 15 - Prob. 14IRP Ch. 15 - Prob. 15IRP Ch. 15 - Prob. 1RP Ch. 15 - Prob. 2RP Ch. 15 - Prob. 3RP Ch. 15 - Prob. 4RP Ch. 15 - This year, Mr. Joss accepted a job with BL Inc. He...Ch. 15 - Mr. Remling is entitled to a 5,200 bonus this year...Ch. 15 - Prob. 3TPC Ch. 15 - Prob. 4TPC

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Solution Summary: The author identifies the option that results in the greatest after-tax cash for Person J to begin the business.

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