A business generates profits of $150,000. The owner currently has a 28% MTR. What is the total amount of taxes paid if the business is a regular corporation and $20,000 in dividends is distributed to its sold individual shareholder?

Question

Quizplus · Accepted Answer

Corporate tax is calculated as $150,000 * 28% = $42,000. However, the correct corporate tax rate should be 21% (as of 2023), so $150,000 * 21% = $31,500. The individual tax on dividends is $20,000 * 15% = $3,000. Total taxes: $31,500 + $3,000 = $34,500. The closest option is A, assuming a slight miscalculation in the corporate tax rate.

A Business Generates Profits of $150,000