A. June and John decide to form a business. They each plan to contribute $20,000...
90.2K
Verified Solution
Link Copied!
Question
Accounting
A.
June and John decide to form a business. They each plan to contribute $20,000 in exchange for a 50 percent interest in the business. They will then take out a bank loan for $30,000 to cover the balance of their working capital needs. They expect that the business will make a profit of $64,000 in the first year and that it will not make any cash distributions that year. Excluding the business income, June, who files as head of household, has $600,000 of other ordinary taxable income. John is married and files a joint return; he and his wife have $240,000 of other ordinary taxable income. They want to know how much tax the business will pay and how much additional tax they will personally pay in 2018 if they form the business as a partnership, S corporation, or C corporation. Consider only income taxes.
B.
Assume the same facts as problem 49, except that the business expects to make a cash distribution of $28,000 each to June and John the first year. Determine how much tax the business will pay and how much additional tax they will personally pay if they form the business as a partnership, S corporation, or C corporation. Consider only income taxes.
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
