The Sasnak Corporation had a 2013 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

The taxable income is $4,450,000 - $750,000 + 70% of $900,000 (since 30% of dividends received are tax-exempt). The tax liability is calculated using the tax schedule, resulting in $1,349,800. The average tax rate is the tax liability divided by taxable income, and the marginal tax rate is 34% as per the tax bracket.

The Sasnak Corporation Had a 2013 Taxable Income of $4,450,000