DEF Corporation and MNO Corporation are both C corporations.To date,DEF has earned $100,000 of taxable income,and MNO has earned $500,000.Each corporation expects to earn another $100,000 of taxable income before year-end.MNO will pay more tax on its incremental $100,000 of taxable income than will MNO.

Question

Quizplus · Accepted Answer

Both DEF and MNO are C corporations and are subject to the same corporate tax rates. Therefore, the tax on the incremental $100,000 of taxable income will be the same for both corporations.

DEF Corporation and MNO Corporation Are Both C Corporations