Nathan Is Single and Owns a 54% Interest in the New

question 95

Essay

Nathan is single and owns a 54% interest in the new NT Partnership, a calendar-year entity. The NT Partnership reports $100,000 of profits for its first year. Assuming Nathan is taxed at a 35% marginal tax rate on the additional income, how much tax does Nathan owe if the NT Partnership does not distribute any of its profits to him?

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Definitions:

Lessee

The party that is granted the right to use an asset for a specified period through a lease agreement.

Lessor

The party that rents out an asset or property to another party, known as the lessee.

Pre-tax Cost

The cost of an investment or financial activity before any taxes are applied.

After-tax Cost

The actual cost of an investment or loan after accounting for the impact of taxes on the return.