Logan, a 50-percent shareholder in Military Gear Inc. (MG), is comparing the tax consequences of losses from C corporations with losses from S corporations. Assume MG has a $111,000 tax loss for the year, Logan's tax basis in his MG stock was $155,500 at the beginning of the year, and he received $80,500 ordinary income from other sources during the year. Assuming Logan's marginal tax rate is 24 percent, how much more tax will Logan pay currently if MG is a C corporation compared to the tax he would pay if it were an S corporation

$10,680

Explanation:

Computation of the amount of how much more tax that Logan will pay currently if MG is a C corporation compared to the tax he would pay if it were an S corporation

Logan would pay the amount of $19,320 in taxes if Military Gear Inc. is a C corporation ($80,500 ×24%).

In a situation were it is an S corporation, that means he would pay the amount of $8,640 in taxes (($80,500 - $44,500) × 24%).

Therefore he has to pay the amount of $10,680 more in his taxes which is ($19,320 - $8,640) currently if Military Gear, Inc.

Logan's tax basis $155,500 -$111,000 tax loss for the year =$44,500

Therefore the amount of money that Logan will tend to pay MG is a C corporation compared to the tax he would pay if it were an S corporation would be $10,680.

explanation: doctrine of respondeat superior is a legal doctrine that is commonly used in tort. this principle makes an employer or principal legally responsible for the wrongful acts done by an employee or agent, if such acts occur within the scope of the employment or agency.

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