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Calculate the tax disadvantage to organizing a U.S. business today if the Jobs and Growth Tax...

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Finance

Calculate the tax disadvantage to organizing a U.S. businesstoday if the Jobs and Growth Tax Reconciliation Act of 2003 passedwith this provision. Consider the following firm: All earnings willbe paid out as dividends, and operating income before taxes will be$1,250,000. The effective corporate tax rate is 35%, and the taxrate on corporate dividends is 10%. The average personal tax ratefor partners in the business is 35%. What is the taxdisadvantage?

7.0%

8.0%

6.75%

6.5%

Answer & Explanation Solved by verified expert
4.4 Ratings (766 Votes)
Let us first list down the information provided in question Operating Income before taxes 1250000 Corporate Tax rate 35 Tax rate on corporate dividends 10 Average personal tax rate for partners 35 If all earnings    See Answer
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Transcribed Image Text

Calculate the tax disadvantage to organizing a U.S. businesstoday if the Jobs and Growth Tax Reconciliation Act of 2003 passedwith this provision. Consider the following firm: All earnings willbe paid out as dividends, and operating income before taxes will be$1,250,000. The effective corporate tax rate is 35%, and the taxrate on corporate dividends is 10%. The average personal tax ratefor partners in the business is 35%. What is the taxdisadvantage?7.0%8.0%6.75%6.5%

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