If the applicable income tax rate is 40% (federal and state combined), and if 70% of dividends received are exempt from taxes, what is the corporation's tax liability?

Your corporation has the following cash flows:

Operating income	$250,000
Interest received	$10,000
Interest paid	$45,000
Dividends received	$24,000
Dividends paid	$50,000

a. $84,436

b. $85,325

c. $88,880

d. $73,770

e. $94,213

Expert Solution

	Amount
Operating income	$250,000
Interest received	$10,000
Interest paid	($45,000)
Dividends received-24000*30%	$7,200
Taxable income	$222,200
Tax rate	40%
Tax payable	$88,880

So option C is correct

jeff jeffy answered 2 years ago

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If the applicable income tax rate is 40% (federal and state combined), and if 70% of dividends received are exempt from taxes, what is the corporation's tax liability?

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