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22 January, 15:43

A company wants to set up their headquarters in Spain where the corporate tax rates are as follows: 11% of first $40,000 profits, 22% of next $26,000, 39% of next $29,000, and 42% of everything over $95,000. Consultants estimate that they will have gross revenues of $380,000, total costs of $120,000, and $15,000 in allowable tax deductions.

What is taxable income for the first year and how much should the company expect to pay in taxes?

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Answers (1)
  1. 22 January, 16:11
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    Total taxable income = $245,000

    Total Tax = $84430

    Explanation:

    given data

    11% of first = $40,000 profits

    22% of next = $26,000

    39% of next = $29,000

    42% of over = $95,000

    gross revenues = $380,000

    total costs = $120,000

    allowable tax deductions = $15,000

    to find out

    taxable income for the first year and how much should the company expect to pay in taxes

    solution

    we get here first Total taxable income that is

    Total taxable income = Total revenue - (Total cost + Tax deductions) ... 1

    put here value we get

    Total taxable income = $380,000 - ($120,000 + $15,000)

    Total taxable income = $380000 - $135000 = $245,000

    so total tax will be

    Total Tax = [0.11 * 40000 + 0.22 * 26000 + 0.39 * 29000 + 0.42 * (245000 95000) ]

    Total Tax = 4400 + 5720 + 11310 + 63000

    Total Tax = $84430
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