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QUESTION 6 "Consider a C corporation. The corporation earns $1 per share before taxes. After the...

QUESTION 6

"Consider a C corporation. The corporation earns $1 per share before taxes. After the corporation has paid its corresponding taxes, it will distribute 0% of its earnings to its shareholders as a dividend. The corporate tax rate is 35%, the tax rate on dividend income is 28%, and the personal income tax rate is set at 28%. How much is the total effective tax rate on the corporation earnings?

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Expert Solution

Particulars Amount Tax
Earnings                   1.00
Less: tax@35%                 (0.35)          0.35
Balance                   0.65
Dividends                       -  
Tax on dividends                       -                -  
Total taxes          0.35
/ earnings          1.00
Effective tax rate 35.00%

Answer is 35%

please rate.

jeff jeffy answered 2 years ago
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