A corporation pays taxes at the flat rate of 40% and has operating profit of $1 million. It pays interest of $300,000 and dividends of $200,000 to its investors. All investors share the same tax
Rates: 35% on interest income and 15% on dividend income. What are the total taxes collected
By the government?

Question

Quizplus · Accepted Answer

The corporation pays $280,000 in taxes (40% of $700,000, which is $1 million profit minus $300,000 interest). Investors pay $105,000 on interest (35% of $300,000) and $30,000 on dividends (15% of $200,000). Total taxes: $280,000 + $105,000 + $30,000 = $415,000.

A Corporation Pays Taxes at the Flat Rate of 40