Loretta Plans to Start a Small Business,operated Through a Corporation

question 42

Multiple Choice

Loretta plans to start a small business,operated through a corporation.In year 0,she expects the corporation to generate a loss of $100,000.Subsequently,she expects the corporation to be profitable,and projects profit of $150,000 in year 1,and $250,000 in year 2.Using Appendix A and a 10% discount rate,calculate the present value of expected tax savings and costs on the business earnings for the first 3 years of operations if the business does not make an S corporation election.

• A)$52,910 total tax cost
• B)$88,250 total tax cost
• C)$94,350 total tax cost
• D)$118,800 total tax cost

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Definitions:

Nucleic Acid

Macromolecules essential for life, including DNA and RNA, which carry genetic information in cells.

Protein

Large, complex molecules made up of amino acids that perform a vast array of functions within living organisms, including structural, enzymatic, and regulatory roles.

Carbon

A chemical element with symbol C, essential as the basis of all known life on Earth, and forms various compounds and exists in different forms like diamond and graphite.

Backbone

The primary support structure for vertebrates, consisting of the spinal column.