Torquay Inc.'s 2014 taxable income was $9,782,200, and its tax liability was $3,325,948. Torquay's director of tax estimates that the corporation's 2015 taxable income will be $13,350,000. Use the corporate tax rate schedule to compute Torquay's 2015 estimated tax payment due on April 15, 2015.

Question

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Using the corporate tax rate schedule, we can find the tax liability for Torquay Inc.'s 2015 taxable income of $13,350,000:

- The first $50,000 is taxed at 15% = $7,500
- Next $25,000 ($50,001 to $75,000) is taxed at 25% = $6,250
- Next $25,000 ($75,001 to $100,000) is taxed at 34% = $8,500
- Next $200,000 ($100,001 to $300,000) is taxed at 39% = $78,000
- Next $3,550,000 ($300,001 to $3,850,000) is taxed at 34% = $1,207,000
- Remaining amount ($9,925,001 to $13,350,000) is taxed at 35% = $1,768,750

Total tax liability = $4,075,000

To find the estimated tax payment due on April 15, 2015, we need to multiply the tax liability by the percentage of the year that has passed. Since April 15 is the deadline for the first quarter, we will assume that one quarter of the year has passed (January 1 to March 31). Therefore:

Estimated tax payment = $4,075,000 * 1/4 = $1,018,750

The closest answer choice to this is D ($1,143,125), which is above our estimate. This could be due to rounding or a different assumption about the percentage of the year that has passed. However, D is still the best choice since it is the closest.