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

question 62

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 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.

• A) $118,800 total tax cost
• B) $99,169 total tax cost
• C) $99,772
• D) $0

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Definitions:

Vital Signs

Basic clinical measurements indicative of an individual's immediate health status, including temperature, pulse, respiration rate, and blood pressure.

Feedback

The process of giving or receiving information about the performance of a task, with the intention of improving the outcome or behavior.

Empowerment

Empowerment refers to the process of increasing the capacity of individuals or groups to make choices and to transform those choices into desired actions and outcomes.

Nurse Manager

A registered nurse who oversees the nursing staff in a healthcare facility, managing budgets, schedules, and patient care standards.