Answered

From tech troubles to travel tips, IDNLearn.com has answers to all your questions. Our Q&A platform offers detailed and trustworthy answers to ensure you have the information you need.

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 :

Abiolataiwo2015idn

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

Thank you for joining our conversation. Don't hesitate to return anytime to find answers to your questions. Let's continue sharing knowledge and experiences! Thank you for visiting IDNLearn.com. We’re here to provide clear and concise answers, so visit us again soon.