Maurice Tutor

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    Argosy University/ Phoniex University/
    Nov-2005 - Oct-2011

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    Phoniex University
    Oct-2001 - Nov-2016

Category > Accounting Posted 02 Aug 2017 My Price 7.00

Corporation vs. Partnership

Corporation vs. Partnership
Charles is planning to invest $10,000 in a venture whose management is undecided as to whether it should be structured as a regular corporation or as a partnership. Charles will hold a 10% interest in the entity. Determine the treatment to Charles if the entity is a corporation and if it is a partnership. In the analysis, assume that Charles is in the 35% marginal tax bracket and the entity, if operating as a corporation, is in the 34% marginal tax bracket. Also assume that the passive activity rules do not reply to Charles.
Additionally, answer all three of the situations below.

    1. If the entity incurs an $80,000 operating loss in year 1, what is Charles’ cash outflow if the entity is a corporation? A partnership?

 

    1. In year 2, the entity earns operating income of $200,000 and makes no distribution to any of the owners. What is the tax burden on Charles if the investment is a corporation? A partnership?

 

  1. In year 3, the entity earns operating income of $200,000 and distributes all of that year’s after-tax proceeds to the owners. What amount of cash is available to Charles if the entity operates as a corporation? A partnership?

Answers

Maurice Tutor
(5)
Status NEW Posted 02 Aug 2017 01:08 PM My Price 7.00

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