You own 100 shares of a Sub Chapter "S" 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?
A)$210
B)$300
C)$350
D)$500

Question

Quizplus · Accepted Answer

The corporation earns $5.00 per share before taxes. Since you own 100 shares, your total earning before taxes will be $5.00 x 100 = $500.

The corporate tax rate is 21%, so the corporation will pay $500 x 0.21 = $105 in taxes.

The remaining amount of earnings is $500 - $105 = $395.

The corporation will distribute the remaining $395 to its shareholders in the form of a dividend. However, your personal tax rate on dividends is 30%, so you will only receive $395 x 0.7 = $276.50.

Therefore, the total amount of money left for you after all taxes have been paid is $276.50.

Option C is the only option that matches this calculation.

You Own 100 Shares of a Sub Chapter "S" Corporation