Calculate the npv of the tax cost or benefit

Assignment Help Accounting Basics

Reference no: EM133610422

Question: Paula is starting a new business and deciding whether to organize it as an LLC or a C corporation. She projects that the business will have a net loss for tax purposes of $200,000 in 2022 (the first year of operations). She then expects the business to have taxable income of $10,000 in 2023 and taxable income of $300,000 in 2024. The following assumptions apply:

Paula's individual marginal tax rate is 37% and the corporate tax rate is 21%.
Assume a discount rate of 5%
Paula is not subject to any limitations on deducting flow-through losses on her individual return
The business will not distribute any money to Paula during these three years
Ignore the QBI deduction and self-employment taxes

Calculate the NPV of the tax cost or benefit if she organizes as an LLC or if she organizes as a C corporation. Enter any tax COST as a negative number; enter any tax BENEFIT as a positive number.

HINT: If you need to carry forward any net operating losses, recall the NOL carryover rules!

Reference no: EM133610422

Questions Cloud

Ownership of the lease does not transfer at the end : There is no bargain purchase option, ownership of the lease does not transfer at the end of the lease term, and the asset is not of a specialized nature

How much of this income is taxable on briannas arizona : Lucas, under a 2016 divorce agreement. Lucas is an Arizona resident. How much of this income is taxable on Brianna's Arizona return

What does myra scenario most accurately represent : What does Myra's scenario MOST accurately represent? master status role conflict role strain agents of socialization

What would be the new profit or loss : Calculate the current break-even point, both in units and sales revenue and According to Beyonca Ltd's marketing plan, what would be the new profit or loss

Calculate the npv of the tax cost or benefit : Calculate the NPV of the tax cost or benefit if she organizes as an LLC or if she organizes as a C corporation. Enter any tax COST as a negative number; enter

Identity and will need to figure this one out teddy needs : Identity and will need to figure this one out Teddy needs further guidance and support. Having a backup plan is wise and he is reacting against his parents

Calculate the cost of ordinary equity for adp : Calculate the cost of ordinary equity for ADP and The cost of preference shares for ADP c) The after-tax cost of debt for ADP

What were you like physically, cognitively, socially : What were you like physically, cognitively, socially and emotionally? Did your development proceed in a typical or atypical manner (please describe)?

What is the first step toward a positive resolution : What is the first step toward a positive resolution when there is a conflict between families and programs? Requiring both parents and teachers to attend

User Account

All Pages