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

question 67

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.Loretta's personal marginal tax rate on ordinary income is 39.6%.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)$73,518 total tax cost
• B)$88,250 total tax cost
• C)$115,406 total tax cost
• D)$118,800 total tax cost

---

Definitions:

Greyhound Bus

A popular interstate and long-distance bus service in the United States, known for connecting cities across the country.

Moderately Crowded

A situation described by an intermediate level of density or population in a given space, which might affect individual's behavior and perception differently.

Reciprocity Norm

A social norm that expects individuals to respond to others with similar kinds of behaviors they have received, contributing to the maintenance of social exchange.

Harm

Harm refers to physical injury, damage, or adverse effects on an individual's welfare or health.