Question

Hunt Taxidermy, Inc., is concerned about the taxes paid by the company in 2015. In addition to $42.6 million of taxable income, the firm received $3,010,000 of interest on state-issued bonds and $1,700,000 of dividends on common stock it owns in Oakdale Fashions, Inc. (Use Table 2.3) Calculate Hunt Taxidermy’s tax liability. (Enter your answer in dollars not in millions. Round your answer to the nearest dollar amount.) Tax liability $ Calculate Hunt Taxidermy’s average tax rate. Average tax rate % Calculate Hunt Taxidermy’s marginal tax rate. Marginal tax rate % Hints

Answer 1

Interest received on state-issued bonds is not added in taxable income because interest on state-issued bonds exempted from federal taxation.

Total Taxable income = taxable income from operation + Dividend received

= $42,600,000 + $1,700,000

= $44,300,000

Total Taxable income is $44,300,000.

Now, Total Tax liability is calculated in excel and screen shot provided below:

Total Tax Liability is $15,504,998.

Average tax rate = Tax liability / Total Taxable income

= $15,504,998 / $44,300,000

= 35%

Average tax rate is 35%.

Maximum slab for tax payment is 35%. SO marginal tax rate is 35%.