You are a shareholder in a C corporation. The corporation earns$ 2.03 per share before taxes....

You are a shareholder in a C corporation. The corporation earns$ 2.03 per share before taxes. Once it has paid taxes it will distribute the rest of its earnings to you as a dividend. Assume the corporate tax rate is 38 % and the personal tax rate on (both dividend and non-dividend) income is

20 %

How much is left for you after all taxes are paid?

Solutions

Expert Solution

As the Corporation earns $ 2.03$ per share.

Now it pays 38% tax on $ 2.03

Now you will get (1-0.38) * 2.03

= 1.2586

Now additional Income Tax on $ 1.2586 will be 20%

Thus final amount left would be (1- 0.2) * 1.2586

= 1.00688

The final amount left for you is $ 1.00688

jeff jeffy answered 1 year ago

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