You own 100 shares of a "C" corporation.The corporation earns $5.00 per share before taxes.Once the corporation has paid any corporate taxes that are due,it will distribute the rest of its earnings to its shareholders in the form of a dividend.If the corporate tax rate is 21% and your personal tax rate on (both dividend and non-dividend)income is 30%,then how much money is left for you after all taxes have been paid?

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Quizplus · Accepted Answer

The corporation earns $5.00 per share before taxes. After paying 21% in corporate taxes, the corporation will have $5.00 - (0.21 * $5.00) = $3.95 per share left to distribute as dividends. After paying 30% in personal taxes on the dividend income, you will have $3.95 - (0.30 * $3.95) = $2.765 per share left. With 100 shares, you will have $2.765 * 100 = $276.50 left after all taxes have been paid.

You Own 100 Shares of a "C" Corporation