Rodger owns 100% of the shares in Trevor Inc., a C corporation. Assume the following for the current year: $$\begin{array} { | l | }
\hline \text { Trevor Inc.'s pre-tax income } = \$ 16,000 \
\hline \text { Trevor Corp's marginal tax rate } = 35 \% \
\hline \text { Percentage of after-tax earnings retained by Trevor Corp } \
= 0 \% \text { (i.e. all after-tax earnings distributed) } \
\hline \text { Rodger's dividend tax rate } = 5 \% \
\hline
\end{array}$$ Given these assumptions, how much cash does Rodger have from the dividend after all taxes have been paid?

Question

Rodger owns 100% of the shares in Trevor Inc., a C corporation. Assume the following for the current year: $$\begin{array} { | l | } 
\hline \text { Trevor Inc.'s pre-tax income } = \$ 16,000 \
\hline \text { Trevor Corp's marginal tax rate } = 35 \% \
\hline \text { Percentage of after-tax earnings retained by Trevor Corp } \
= 0 \% \text { (i.e. all after-tax earnings distributed) } \
\hline \text { Rodger's dividend tax rate } = 5 \% \
\hline
\end{array}$$ Given these assumptions, how much cash does Rodger have from the dividend after all taxes have been paid?

Quizplus · Accepted Answer

The Answer of Rodger owns 100% of the shares in Trevor Inc., a C corporation. Assume the following for the current year: $$\begin{array} { | l | } 
\hline \text { Trevor Inc.'s pre-tax income } = \$ 16,000 \
\hline \text { Trevor Corp's marginal tax rate } = 35 \% \
\hline \text { Percentage of after-tax earnings retained by Trevor Corp } \
= 0 \% \text { (i.e. all after-tax earnings distributed) } \
\hline \text { Rodger's dividend tax rate } = 5 \% \
\hline
\end{array}$$ Given these assumptions, how much cash does Rodger have from the dividend after all taxes have been paid?

Rodger Owns 100% of the Shares in Trevor Inc Given These Assumptions, How Much Cash Does Rodger Have from C