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Business, 09.09.2019 23:30 Yskdl

Sandra would like to organize bal as either an llc (taxed as a sole proprietorship) or a c corporation. in either form, the entity is expected to generate an 8 percent annual before-tax return on a $700,000 investment. sandra’s marginal income tax rate is 37 percent and her tax rate on dividends and capital gains is 23.8 percent (including the 3.8 percent net investment income tax). if sandra organizes bal as an llc, she will be required to pay an additional 2.9 percent for self-employment tax and an additional 0.9 percent for the additional medicare tax. bal’s income is not qualified business income (qbi) so sandra is not allowed to claim the qbi deduction. assume that bal will distribute all of its after-tax earnings every year as a dividend if it is formed as a c corporation.
a. how much cash after taxes would sandra receive from her investment in the first year if bal is organized as either an llc or a c corporation?
b. what is the overall tax rate on bal’s income in the first year if bal is organized as an llc or as a c corporation?

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