What is the after-tax of return to the taxpayer

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Reference no: EM132019584

Suppose a taxpayer invests $100,000 in a partnership. The taxpayer faces a personal tax of 70% and a tax rate on capital gains of 28%.

In this year, the partnership spends the entire $10,000 on research, which the taxpayer can claim as a deduction against her other income.

In the second year, the partnership sells the developed technology, and the taxpayer's share of the sale price is $50,000, which is taxed as a capital gain. (Ignore the time value of money in your answer).

a) What is the pretax rate of return to the taxpayer?

b) What is the after-tax of return to the taxpayer?

Reference no: EM132019584

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