Jabar Corporation, a C corporation, projects that it will have taxable income of
ID: 2461378 • Letter: J
Question
Jabar Corporation, a C corporation, projects that it will have taxable income of $260,000 before incurring any lease expenses. Jabar’s tax rate is 35 percent. Abdul, Jabar’s sole shareholder, has a marginal tax rate of 39.6 percent on ordinary income and 20 percent on dividend income. Jabar always distributes all of its after-tax earnings to Abdul.
What is the amount of the overall tax (corporate level + shareholder level) on Jabar Corp.’s $260,000 prelease expense income if Jabar Corp. distributes all of its after-tax earnings to its sole shareholder, Abdul (include the 3.8% net investment income tax on dividend and rental income.)? (Input all answers as a positive number and round your answers to the nearest whole dollar.)
What is the amount of the overall tax on Jabar Corp.’s $260,000 prelease expense income if Jabar leases equipment from Abdul at a cost of $28,300 for the year (include the net investment income tax on dividend and rental income.)? (Input all answers as a positive number and round your answers to the nearest whole dollar.)
What is the amount of the overall tax on Jabar Corp.’s $260,000 prelease expense income if Jabar Corp. leases equipment from Abdul at a cost of $28,300 for the year but the IRS determines that the fair market value of the lease payments is $18,500 (include the net investment income tax on dividend and rental income.)? (Input all answers as a positive number and round your answers to the nearest whole dollar.)
Jabar Corporation, a C corporation, projects that it will have taxable income of $260,000 before incurring any lease expenses. Jabar’s tax rate is 35 percent. Abdul, Jabar’s sole shareholder, has a marginal tax rate of 39.6 percent on ordinary income and 20 percent on dividend income. Jabar always distributes all of its after-tax earnings to Abdul.
Explanation / Answer
Part 1)
The overall tax is calculated with the use of following table:
___________
Part 2)
The overall tax is calculated with the use of following table:
___________
Part 3)
The overall tax is calculated with the use of following table:
No Lease Payment Taxable income before lease payment 260,000 Lease Payment 0 Taxable income 260,000 entitiy tax (260,000*35%) 91,000 after-tax entity earnings 169,000 abdul's tax on dividends (169,000*20%) 33,800 abdul's tax on lease payments 0 overall tax (91,000 + 33,800) $124,800Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.