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Ronald is exploring whether to open a franchise of Quick Tax. He plans on forming an S corporation and investing $15,000 of his own money while borrowing $45,000 from the bank to finance the purchase of the necessary computing equipment and software. The bank has proposed two financing options. Under the first option, the interest rate is only 10%, but the loan is recourse. The second option increases the interest rate to 15%, but the loan is nonrecourse.
a.Discuss the tax and non-tax aspects of the two options.
b.If Ronald incurs a $20,000 loss in the first year of operations, how much, if any, of the loss can he deduct if the loan is recourse? Nonrecourse?
Senior Executives
Top-level managers or leaders in an organization responsible for making strategic decisions and overseeing operations.
Communication
The process of conveying information or expressing ideas and feelings to others through verbal, written, or non-verbal means.
Ethics
Ethics refers to the principles and moral beliefs that guide individual or group behavior, distinguishing between what is right and wrong.
Conduct
The manner in which an individual behaves or performs an activity, often judged against a set of standards or ethical codes.
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