Company Z has $90,000 of taxable income from its operations,$5,000 of interest income,and $30,000 of dividend income from preferred stock it holds in other corporations.Its corporate tax rate is 25%.What is Company Z's tax liability? Assume a 50% dividend exclusion for tax on dividends.

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Quizplus · Accepted Answer

Company Z's taxable income is $90,000 from operations plus $5,000 of interest income. The $30,000 of dividend income is subject to a 50% exclusion, so only $15,000 ($30,000 * 50%) is taxable. Therefore, the total taxable income is $90,000 + $5,000 + $15,000 = $110,000. At a 25% tax rate, the tax liability is $110,000 * 25% = $27,500.

Company Z Has $90,000 of Taxable Income from Its Operations,$5,000