You are a shareholder in a C corporation. The corporation earns $36 per share before taxes....

You are a shareholder in a C corporation. The corporation earns $36 per share before taxes. Once it has paid taxes it will distribute the rest of its earnings to you as a dividend. The corporate tax rate is 25% and the personal tax rate on dividend income is 42% . How much is left for you after all taxes are paid?

Expert Solution

Earnings before taxes	36
(-) Corporate tax @25%	9
Net income [ All distributed as dividend ]	27

Amount of dividend left after all taxes = Dividend(1- Personal Tax%) = 27(1-42%)	15.66

jeff jeffy answered 2 years ago

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