Loretta Plans to Start a Small Business, Which Will Operate

question 57

Multiple Choice

Loretta plans to start a small business, which will operate as 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. Loretta's personal marginal tax rate on ordinary income is 37%. 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 makes an S corporation election. Assume the excess business loss limitation does not apply.

• A) $52,910 total tax cost
• B) $89,855 total tax cost
• C) $99,772 total tax cost
• D) $0

Recognize the relationship between personality traits and the experience of flow.

Understand the undoing hypothesis and its relevance to emotional regulation.

Understand the factors that influence aggregate demand and how changes in price levels affect spending on net exports and investment.

Recognize the irregular nature of economic recessions and their impact on consumption and investment spending.

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Definitions:

Inquisitiveness

The quality of being eager to know or learn about something, often leading to asking questions and exploring.

Certified

A designation given to individuals or products that have met predetermined standards or requirements, often through successful completion of an examination or evaluation.

Critical Thinking

The analytical thought process involving the evaluation of facts and arguments to form a rational judgement.

Physical Abuse

The infliction of bodily injury or harm intentionally by another person, which can include hitting, burning, or any other physical attack.