Assume that all earnings will be paid out as cash dividends. Operating income

calculate the tax disadvantage to organization a U.S. business today after passage of the Jobs and Show more calculate the tax disadvantage to organization a U.S. business today after passage of the Jobs and Growth Tax Relief Reconciliation Act of 2003 as a corporation vs. a partnership under the following conditions. Assume that all earnings will be paid out as cash dividends. Operating income (operating profit before taxes) will be $500000 per year under either organizational form; the effective corporate profits tax rate is 35%( Tc=0.35); the averafe personal tax rate for the partners of the business is also 35% ( Tp=.35); and capital gains tax rate on dividend income is 15% (Tcg= .15). Then recalculate the tax disadvantage using the same income but with the maximum tax rates that existed before 2003. These rates were 35% (Tcg=.15) on corporate profits and 38.6 % (Tp=.386) on personal investment income. Show less

 
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