Bryan Houlberg expects his C corporation to generate a profit of $200,000. What is Bryan's after-tax cash flow from the corporation if net income after corporate tax is distributed to him as a dividend and his marginal tax rate on ordinary income is 35%?

Question

Quizplus · Accepted Answer

The corporation pays corporate tax on the profit, and then Bryan pays personal tax on the dividend. Assuming a corporate tax rate of 21%, the net income after corporate tax is $158,000 ($200,000 - $42,000). Bryan then pays a 35% tax on the dividend, leaving him with $117,937 ($158,000 - $55,300).

Bryan Houlberg Expects His C Corporation to Generate a Profit