Assume That the Corporate Tax Rate Is 34% and the Personal

question 18

Multiple Choice

Assume that the corporate tax rate is 34% and the personal tax rate is 30%.The founders of a newly formed business are debating between setting up the firm as a partnership versus a corporation.The firm will not need to retain any earnings,so all of its after-tax income will be paid out to its investors,who will have to pay personal taxes on whatever they receive.What is the difference in the percentage of the firm's pre-tax income that investors actually receive and can spend under the corporate and partnership forms of organization ?

• A) 22.61%
• B) 23.80%
• C) 21.90%
• D) 23.56%
• E) 28.56%

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