Question

Purple Company is a C corporation and the corporation pays out all of its after-tax income as a dividend to Kirsten. Note: Individual taxpayers received preferential treatment regarding the taxation of qualified dividends (0%,15%,20%). For single taxpayers, the 0 percent rate applies to the first $40,000 of taxable income. Purple Corporation's after-tax income is $ and Kirsten's after tax income is $_________ .

Answer 1

Answer:

Purple Corporation's after-tax income is $158,000 and Kirsten's after tax income is $136,100.

Explanation:

some information was missing, so I looked it up:

• Purple Corporation's income = $200,000
• corporate tax rate = 21%
• Kristen claims standard deduction $12,000

Purple's corporate tax liability = $200,000 x 21% = $42,000

Purple's after tax income = ($200,000 - $42,000) = $158,000

Since Kristen's taxable income is $146,000 (qualified dividends are included in AGI but taxed at different rate), her tax rate will be 15%. Kristen's after tax income = $$158,000 - (146,000 x 15%) = $136,100