Corporate Taxes The Sasnak Corporation had a 2010 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

Using Table 2.3, we find that for a taxable income of $4,450,000, the income tax liability is $1,349,800.
The average tax rate is calculated as (income tax liability/taxable income from operations) x 100%, which gives us (1,349,800/4,450,000) x 100% = 30.33%.
The marginal tax rate is the tax rate applicable to an additional dollar of taxable income. Since Sasnak falls in the 34% tax bracket, its marginal tax rate is also 34%.

Corporate Taxes the Sasnak Corporation Had a 2010 Taxable Income