Taxation project 01 Case Study Example | Topics and Well Written Essays - 1000 words

Taxation project 01 - Case Study ExampleTherefore, assuming a marginal tax set up of 39.6%, amount available for re coronation = yearly cash meld tax. Thus, 100,000 - (100,000*39.6%) = 100,000 39,600 = $ 60,400 (Schanz & Schanz, 2011).Q2 If Sandra operates the business as a regular C Corporation that makes no dividend distributions, calculate the yearly after tax cash combine available for reinvestment in the business. A C corporation is a business organization formulated to restrain the owners liabilities. Therefore, C corporations, in the eyes of law, are dissimilar from their owners. Using corporate tax rates, the business income is taxed at 34%. Therefore, if the corporation makes no dividend payments, the annual after tax cash flow available for reinvestments in the business = 13750 + (100,000 75,000)*34%) = (100,000 22,250) = $ 77,750 (Schanz & Schanz, 2011).Q3 there is no tax consequence in this case. Therefore, Sandra is still obligated to pay (100,000 *39.6%) = $ 39, 600 as tax expense. As a result, the annual after tax cash flow remaining in the business = (100,000 39,600) = $ 60,400. On the other hand, Sandra depart have (100,000 20,000) = $ 80,000 from the withdrawal (Schanz & Schanz, 2011).Q4 Sandras corporation will be taxed twice if withdrawals are made to fund dividend payments to shareholders. The first tax will apply to taxable income and the second will be applied to dividend. However, the rate of tax and the taxable income will not be affected. The income tax = 13,750 + ((100,000 -75,000) * 34%) = 22,250. As a result, after tax cash flow remaining for investment in the business = 100,000 22,250 = $ 77,750. The dividends will be subject to tax rate similar to that of long-term capital gain (15%). Therefore, the after tax cash flow from the dividend = (20,000*20%) = $ 4,000 (Schanz & Schanz, 2011).Q5 If Sandra wishes to operate the business