Answered

Welcome to Westonci.ca, where finding answers to your questions is made simple by our community of experts. Get quick and reliable solutions to your questions from a community of seasoned experts on our user-friendly platform. Our platform offers a seamless experience for finding reliable answers from a network of knowledgeable professionals.

Logan, a 50% 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 $100,000 tax loss for the year, Logan's tax basis in his MG stock was $150,000 at the beginning of the year, and he received $75,000 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?

Sagot :

abiolataiwo2015

Answer:

$12,000

Explanation:

Calculation for 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

First step is to calculate the amount he will pay for the taxes if Military Gear Inc. is a C corporation

Tax amount=($75,000 × 24%)

Tax amount=$18,000

Second step is to calculate the amount he will pay for the taxes if Military Gear Inc. is a S corporation

Tax amount=($75,000 -$50,000)*24%

Tax amount=$25,000*24%

Tax amount=$6,000

Now let calculate how much more tax will Logan pay currently

Tax amount=$18,000-$6,000

Tax amount=$12,000

Therefore 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 will be $12,000

We appreciate your time. Please revisit us for more reliable answers to any questions you may have. Thanks for using our service. We're always here to provide accurate and up-to-date answers to all your queries. Get the answers you need at Westonci.ca. Stay informed by returning for our latest expert advice.