You own 100 shares of a "C" corporation. The corporation earns $4.00 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 20% and your personal tax rate on (both dividend and non-dividend) income is 20%, then how much money is left for you after all taxes have been paid?

Question

Business

Jared Atkins

15 February, 17:31

You own 100 shares of a "C" corporation. The corporation earns $4.00 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 20% and your personal tax rate on (both dividend and non-dividend) income is 20%, then how much money is left for you after all taxes have been paid?

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Malcolm Buchanan · Answer 1

Answer: $320

Explanation:

Given the following;

Number of shares = 100

Earning per share = $4

Corporate tax rate = 20%

Individual tax rate (dividend and nin-dividend) = 20%

Income accrued by shareholders of a corporation are subjected to double taxation, first is the corporate tax paid by the corporation and then the personal tax paid individually after shareholders have received their dividend.

Total earning = earning per share * number of shares

Total earning = $4 * 100 = $400

Personal tax rate of 20% (dividend and non-dividend)

Tax amount = (20 : 100) * $400

Tax amount = 0.2 * $400 = $80

Amount left after taxes = $400 - $80 = $320