| Course | ACC-4210 Federal Income Taxation |
|---|---|
| Module | Module 6 |
| Paper type | Written Assignment 6: corporations and partnerships, capital gains and losses |
| Length | About 805 words, 5 pages |
| Format | APA 7 student paper |
| School | Thomas Edison State University |
| Program | Bachelor of Science in Business Administration |
| Updated | October 2026 |
Free sample paper for ACC 4210 Module 6
Netting Gloria Okafor's Gains and Choosing an Entity for Kwame Asante
Student Name
Bachelor of Science in Business Administration, Thomas Edison State University
ACC-4210: Federal Income Taxation
Mentor Name
Month Day, Year
Netting Gloria Okafor's Gains and Choosing an Entity for Kwame Asante
Introduction
Capital gains are taxed at lower rates than ordinary income when assets are held more than a year, but only after gains and losses are netted in a prescribed order. Business income is taxed very differently depending on the legal and tax form of the business. This assignment covers both.
Part A: Discussion Questions
1. Why are long-term capital gains taxed at lower rates? Several reasons are offered. Part of a nominal gain reflects inflation rather than real income. Gains are taxed only when realized, so high rates encourage investors to hold assets to avoid tax, the lock-in effect. And corporate profits behind stock gains have often been taxed at the corporate level already. Dowd et al. (2015) estimated that realizations respond strongly to rate changes in the short run but much less in the long run, which bears on how much revenue lower rates actually cost.
2. Why is C corporation income taxed twice, and how do pass-through entities avoid it? A C corporation is a separate taxpayer that pays tax on its income at 21%; when it distributes after-tax profit as dividends, shareholders pay tax again. S corporations and partnerships generally pay no entity-level income tax; their income passes through to owners, who pay tax once at individual rates. Cooper et al. (2016) found that pass-through businesses earned more than half of U.S. business income and faced a lower average federal tax rate than C corporations (Young et al., 2024).
Part B: Netting Gloria Okafor's Gains and Losses
Gloria's 2024 property transactions from Module 5 produced the following results:
Netting proceeds in steps. Within the 15% group, the $2,500 loss offsets the $54,000 gain, leaving $51,500. The short-term loss of $1,800 has nothing short term to offset, so it reduces long-term gains, starting with the highest-rate group: the 25% group falls from $15,000 to $13,200.
Applying the short-term loss to the 25% group first is favorable to Gloria, because it removes gain from the highest-rate group. Her 15% group may be partly taxed at 0% if her ordinary taxable income, mostly her teacher's pension, leaves room below the $47,025 top of the 0% bracket for a single filer.
To illustrate the loss limit: had Gloria's transactions produced a net capital loss of $5,200 instead, she could deduct $3,000 against ordinary income in 2024 and carry the remaining $2,200 forward indefinitely, keeping its short-term or long-term character.
| Transaction | Holding period | Rate group | Gain or loss |
|---|---|---|---|
| Home sale, after the $250,000 exclusion | Long term | 15% group | $54,000 |
| Like-kind exchange boot, unrecaptured Section 1250 gain | Long term | 25% group | 15,000 |
| Inherited stock | Long term | 15% group | (2,500) |
| Gifted shares | Long term | Not applicable | None |
| Cryptocurrency | Short term | Short term | (1,800) |
| Result after netting | Amount | Maximum rate | |
| Unrecaptured Section 1250 gain | $13,200 | 25% | |
| Other net long-term capital gain | 51,500 | 15% for Gloria's income level | |
| Net capital gain | $64,700 |
Part C: Choosing an Entity for Kwame Asante
Kwame's photography business has grown, and he expects $100,000 of profit next year before any salary to himself. He asked how each entity choice would change his taxes, simplified to federal income and payroll taxes.
Paying out most of each year's profit, as Kwame would, means the corporation's two layers of tax make it the most expensive form at his scale. The S corporation saves payroll tax on profit above a reasonable salary, roughly $6,480 in this example, but adds payroll filings, a separate return and the risk that the IRS will challenge a salary set too low. A partnership makes sense only if he actually brings in a partner; its taxation resembles a sole proprietorship's.
| Entity | How profit is taxed | Payroll or self-employment tax |
|---|---|---|
| Sole proprietorship | All profit on his individual return; the QBI deduction may apply | Self-employment tax on 92.35% of all profit, about $14,130 |
| C corporation | Corporate tax of 21%, $21,000 on profit retained or distributed; if the remaining $79,000 is paid as qualified dividends, a further 15% at his level, $11,850, a combined 32.85% | Payroll taxes only on any salary he takes |
| S corporation | Profit passes through to his return; the QBI deduction may apply to the profit beyond salary | Payroll taxes of 15.3% only on a reasonable salary, such as $50,000, about $7,650 |
| Teaming up with a videographer as partners | Profit split per the agreement and reported to each on a K-1 | Self-employment tax on each partner's allocated profit and guaranteed pay |
Recommendation
At $100,000 of expected profit, an S corporation election for an LLC is worth considering if Kwame can document a reasonable salary for a photographer and is prepared for the extra administration. A C corporation would make sense only if he planned to retain most profits in the business for expansion, since retained earnings are taxed only at 21% until distributed.
References
Cooper, M., McClelland, J., Pearce, J., Prisinzano, R., Sullivan, J., Yagan, D., Zidar, O., & Zwick, E. (2016). Business in the United States: Who owns it, and how much tax do they pay? Tax Policy and the Economy, 30(1), 91-128. https://doi.org/10.1086/685594
Dowd, T., McClelland, R., & Muthitacharoen, A. (2015). New evidence on the tax elasticity of capital gains. National Tax Journal, 68(3), 511-544. https://doi.org/10.17310/ntj.2015.3.02
Young, J. C., Nellen, A., Persellin, M. B., Lassar, S. S., Cuccia, A. D., & Cripe, B. M. (2024). South-Western federal taxation: Individual income taxes, 2024 (47th ed.). Cengage Learning.
ACC 4210 Module 6 instructions, in plain terms
Written Assignment 6 covers Module 6, Corporations and Partnerships and Capital Gains and Losses, the last module before the final project, which replaces a final exam with a tax return and two end-of-chapter problems. This last set's questions are drawn from the textbook's material on capital assets and on corporations and partnerships. Expect problems that classify assets as capital or ordinary, determine holding periods, net gains and losses by group, apply the capital loss limit and carryforward, and compare how C corporations, S corporations and partnerships are taxed. Gloria and Kwame return from Modules 3 and 5, so the gains and the business profit are already familiar.
How this ACC 4210 Module 6 example is built
Part A answers two discussion questions on the reasons for preferential capital gain rates and for double taxation of C corporations, each with a research finding. Part B lists the five property results from the previous assignment with holding period and rate group, then nets them step by step and shows the result in a second table with maximum rates, adding a short loss limit illustration. Part C compares four entity forms for the same $100,000 of profit in one table covering both income and payroll taxes, then weighs the savings against the costs and risks. A brief recommendation closes the assignment with the conditions under which each choice makes sense. The recommendation ties each entity's appeal to the owner's plans for the profit rather than to tax alone.
Where the marks sit in the ACC 4210 Module 6 rubric
This final written assignment is one of six that share 26 percent of the ACC-4210 grade, graded for correct answers with all computations shown. On capital gains, mentors check holding periods, the grouping of gains by rate, the order of netting, the treatment of short-term losses against long-term groups, the $3,000 loss limit and the carryforward. On entities, they look for accurate statements of how each form is taxed, correct computation of the corporate and shareholder taxes, attention to reasonable salary for S corporations and a recommendation that follows from the numbers. Discussion answers should explain the economic reasoning behind each rule, which the final project also draws on.
Common ACC 4210 Module 6 mistakes, and how to avoid them
Capital gain netting errors come from skipping steps. Net within each group first, then apply net losses to the other groups in the required order, starting with the highest-rate gains. Remember that unrecaptured Section 1250 gain is taxed at up to 25%, and that only $3,000 of net capital loss offsets ordinary income each year. In entity comparisons, include payroll or self-employment taxes, not only income tax, and remember that C corporation dividends are taxed again at the shareholder level. Keep the profit figure constant across entities. Send your netting and entity problems, and a writer will lay them out the same way, with the first one free. Remember that state taxes and payroll filing costs also enter a real entity decision.
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ACC 4210 Module 6 questions, answered
Where can I find a free ACC 4210 Module 6 sample paper?
The final ACC-4210 written assignment is above: capital gains and losses netted by rate group with the loss limit, and a comparison of four business entity forms for the same profit.
How are capital gains and losses netted?
Within each holding period and rate group first, then net losses offset gains in other groups, with short-term losses reducing the highest-rate long-term gains first.
How much capital loss can be deducted each year?
Up to $3,000 of net capital loss against ordinary income, $1,500 if married filing separately, with the rest carried forward indefinitely.
What is the combined tax rate on C corporation profits paid as dividends?
With the 21% corporate rate and a 15% dividend rate, the combined federal rate is 32.85% before any surtax.
How does an S corporation save payroll tax?
Owners pay payroll taxes only on a reasonable salary; the remaining profit escapes payroll tax, though the salary must be defensible.