Question
In: Accounting
Assume a corporate tax rate is 40% and an individual tax rate of 25%. Perryton Corp....
Assume a corporate tax rate is 40% and an individual tax rate of 25%. Perryton Corp. earned $12,000,000 before income taxes during the year. Perryton kept $5,000,000 of after-tax profits inside the company to support future growth. How much total tax would have been paid to Internal Revue Service (IRS) by all related parties?
Solutions
Expert Solution
| Income before taxes | $12,000,000 |
| Less: Income tax @40% | $4,800,000 |
| Income after taxes | $7,200,000 |
| Income kept for future growth | $5,000,000 |
| Income distributed as dividend | $2,200,000 |
| Tax paid by shareholders (25%) | $550,000 |
| Total tax paid by all related parties to IRS | |
| Tax paid by corporation | $4,800,000 |
| Tax paid by shareholders on dividend | $550,000 |
| Total tax paid by all related parties to IRS | $5,350,000 |
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