Corporate Taxes. Montgomery Enterprises, Inc., had operating earnings of $280,000 for the year just ended. During...

Corporate Taxes. Montgomery Enterprises, Inc., had operating earnings of $280,000 for the year just ended. During the year the firm sold stock that it held in another company for $180,000, which was $30,000 above its original purchase price of $150,000, paid 1 year earlier.

a.) What is the amount, if any, of capital gains realized during the year?
b.) How much total taxable income did the firm earn during the year?
c.) Use the corporate tax rate schedule given in Table 1.4 to calculate the firm’s total taxes due.
d.) Calculate both the average tax rate and the marginal tax rate on the basis of your findings.

Expert Solution

Tax rate not available. Therefore, Que. (d) could not b e attempted properly.


	Operating Profit	$ 2,80,000
	Capital gain from share of sale	$ 30,000	=180000-150000
	TOTAL	$ 3,10,000

Ans A.	Gains made during the year	$ 3,10,000	includes Operating profit and Capital gains

Ans B.	Taxable income	$ 3,10,000	includes Operating profit and Capital gains

Ans C.	Tax	$ 1,24,000	Tax rate not mentioned in question. Assumed @ 40%. Tax charged on profit including Operating profit and Capital gains

ekkarill92 answered 2 years ago

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