Corporate Taxes The Carolina Corporation had a 2010 taxable income of $3,000,000 from operations after all operating costs but before (1) interest charges of $500,000,
(2) dividends received of $75,000,
(3) dividends paid of $1,000,000, and
(4) income taxes.
Using the tax schedule in Table 2.3, what is Carolina's income tax liability?
What are Carolina's average and marginal tax rates on taxable income from operations?

Question

Quizplus · Accepted Answer

Carolina's taxable income is $3,000,000 - $500,000 + $75,000 - $1,000,000 = $2,575,000. Its tax liability is $857,650. Its average tax rate is $857,650/$2,575,000 = 28.59%. Its marginal tax rate is 34%.

Corporate Taxes the Carolina Corporation Had a 2010 Taxable Income