Osprey Company Had a Net Loss of $200,000 from Merchandising

question 37

Essay

Osprey Company had a net loss of $200,000 from merchandising operations in 2011, its first year of operations. Mary, the sole owner of Osprey, works full time in the business. She has a large amount of income from other sources and is in the 35% marginal tax bracket irrespective of Osprey. Considering this information, compare the affect of Osprey's loss to Mary under the various types of entity forms discussed in the chapter.

---

Definitions:

Book Depreciation

The amount of depreciation expense that has been allocated for a fixed asset in a company's financial records.

Tax Rate

The percentage at which an individual or corporation is taxed by the government.

Income Tax Expense

The total amount of income tax a company is required to pay to tax authorities, as calculated based on taxable income.

Deferred Tax Liability

A tax obligation that a company owes but is not due to be paid until a future period, often resulting from timing differences in recognizing income and expenses for tax and accounting purposes.