Mr.Longwood and Mrs.Kennett are the equal shareholders in LK Corporation.Both shareholders have a 39.6 percent marginal tax rate on ordinary income.LK's financial records show the following: Corporate tax rate schedule. a.Compute the combined tax cost for LK,Mr.Longwood,and Mrs.Kennett attributable to LK's operations.
b.How would your computation change if the interest on the shareholder debt was $175,000 and LK paid no dividends?

Question

Mr.Longwood and Mrs.Kennett are the equal shareholders in LK Corporation.Both shareholders have a 39.6 percent marginal tax rate on ordinary income.LK's financial records show the following: Corporate tax rate schedule.  a.Compute the combined tax cost for LK,Mr.Longwood,and Mrs.Kennett attributable to LK's operations.
b.How would your computation change if the interest on the shareholder debt was $175,000 and LK paid no dividends?

Quizplus · Accepted Answer

The Answer of Mr.Longwood and Mrs.Kennett are the equal shareholders in LK Corporation.Both shareholders have a 39.6 percent marginal tax rate on ordinary income.LK's financial records show the following: Corporate tax rate schedule.  a.Compute the combined tax cost for LK,Mr.Longwood,and Mrs.Kennett attributable to LK's operations.
b.How would your computation change if the interest on the shareholder debt was $175,000 and LK paid no dividends?

MrLongwood and Mrs