Expenses in IPS

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sfad

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Given the below (tax rate 25%)
- Pretax income = 140k
- After tax income = 105k
- Expenses = 96k
- Net after-tax = 105k - 96k = 9k
- Net pre-tax = 9k / 0.75 = 12k
Are expenses always considered on an after-tax basis?
 
Yes, because you can only pay your expenses from the money which you can use to spend (i.e. Your after-tax income).
 
sfad wrote:
Given the below (tax rate 25%)
- Pretax income = 140k
- After tax income = 105k
- Expenses = 96k
- Net after-tax = 105k - 96k = 9k
- Net pre-tax = 9k / 0.75 = 12k
Are expenses always considered on an after-tax basis?
Click to expand...
I think you are right up until - Net after-tax = 105k - 96k = 9k
You dont need Net Pre-Tax coz you have already factored in After Tax Income in your calculation. We dont pay tax on exp (hence pretax posttax is not required)
Please correct me if wrong.
 
AT income: 140-12 = 128 * .75 = 96
Expenses: 96
Liquidity requirements, only the $50k, then the return requirements are zero for the annual expenses.
 
MrSmart wrote:
AT income: 140-12 = 128 * .75 = 96
Expenses: 96
Liquidity requirements, only the $50k, then the return requirements are zero for the annual expenses.
Click to expand...
But after tax income is 140 x 0.75 = 105
So net after tax income = 105 - 96 = 9
Then after that is where we convert to pre tax income as 9 / 0.75 = 12.
So i guess expenses are after-tax, and to find pre-tax amounts we only gross up after we get to after-tax amount?
 
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