FP5eQCh14 - Problems with Guided Answers by Ellen Seymour...

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Financial Planning in Australia 5e Problems Ch14 Page 1 Problems with Guided Answers by Ellen Seymour © 2013 Reed International Books Australia Pty Limited trading as LexisNexis. Permission to download and make copies for classroom use is granted. Reproducing or distributing any material from this website for any other purpose requires written permission from the Publisher. Chapter 14: Tax Strategies Note: for simplicity, answers have left out Medicare levy calculations. 1 How much can Bill and Tina save as a couple if they run Bill’s business through a partnership arrangement? (Assume that Tina has provided capital and will contribute value to the partnership.) Bill’s business generated $177,000 in income, $22,500 in expenses. Your answer should compare sole trader with partnership tax implications. Assessable income: 177,000 Bill (Sole Trader) Deductions (22,500) Taxable income 154,500 Tax payable (37c) (45,112)* After-tax income $109,388 * 154,500 – 80,000 × 0.37 + 17,547 If it is a partnership: Income $177,000 Bill and Tina Partnership Income Statement Expenses ($22,500) Net income of partnership Split 50:50 between partners assuming equal capital contribution each $77,250 $154,500 Therefore:
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