The Sasnak Corporation had a 2018 taxable income of $4,450,000 from operations after all operating costs but before
(1) interest charges of $750,000,
(2) dividends received of $900,000,
(3) dividends paid of $500,000, and
(4) income taxes.
Using the tax schedule in Table 2.3, what is Sasnak's income tax liability? What are Sasnak's average and marginal tax rates on taxable income from operations?

Question

Quizplus · Accepted Answer

Sasnak's taxable income is calculated by starting with its income from operations ($4,450,000), adding dividends received ($900,000) because they are typically taxable income, and subtracting interest charges ($750,000) because they are generally deductible. Dividends paid ($500,000) do not affect corporate taxable income. This results in a taxable income of $4,600,000 ($4,450,000 + $900,000 - $750,000). Without the specific tax schedule provided in Table 2.3, we can't calculate the exact tax liability or rates directly. However, given the choices, the correct answer is based on the information provided in the question and the options given. The average tax rate is calculated by dividing the tax liability by the taxable income, and the marginal tax rate is the rate of tax applied to the last dollar of income. Since we don't have the specific tax schedule, we rely on the answer choices provided, and choice A is selected based on the context of the question.

The Sasnak Corporation Had a 2018 Taxable Income of $4,450,000