You own 100 shares in a corporation. The corporation earns $5.00 per share before taxes. Once the corporation has paid any corporate taxes that are due, it will distribute the rest of its earnings to its shareholders in the form of a dividend. If the corporate tax rate is 40% and your personal tax rate on (both dividend and non-dividend)income is 30%, then how much money is left for you after all taxes have been paid?

Question

Quizplus · Accepted Answer

The corporation earns $5.00 per share before taxes. After paying 40% in corporate taxes, the corporation has $3.00 per share left. With 100 shares, the corporation has $300 left to distribute to shareholders. After paying 30% in personal taxes on the dividend income, the shareholder has $210 left.

You Own 100 Shares in a Corporation