McGraw-Hill's Taxation of Business Entities 3rd Edition by Connie Weaver, Brian Spilker, Edmund Outslay, John Robinson, Ronald Worsham, Benjamin Ayers, John Barrick

Exercise 32

Evon would like to organize SHO as either an LLC or as a C corporation generating a 9 percent annual before-tax return on a $200,000 investment. Assume individual and corporate tax rates are both 35 percent and individual capital gains and dividend tax rates are 15 percent. SHO will pay out its after-tax earnings every year as a dividend if it is formed as a corporation. Assume Evon is the sole owner of the entity and ignore self-employment taxes.
a. How much would Evon keep after taxes if SHO is organized as either a C corporation or an LLC
b. What are the overall tax rates if SHO is organized as either an LLC or a C corporation