Question

An S corporation earns $ 9.00 per share before taxes. The corporate tax rate is​ 39%, the personal tax rate on dividends is​ 15%, and the personal tax rate on​ non-dividend income is​ 36%. What is the total amount of taxes paid if the company pays a $ 6.00 ​dividend?

Answer 1

Answer:

$4.41

Explanation:

S corporation earns $9.00 per share before tax is paid

Corporate tax rate is 39%

= 39/100

= 0.39

Personal tax rate on dividend is 15%

= 15/100

= 0.15

The rate on non-dividend income is 36%

The company pays $6.00 for dividend

Therefore, the total amount of taxes paid can be calculated as follows

Corporate tax= $9.00×0.39

= $3.51

Personal tax= $6.00×0.15

= $0.90

Total amount of tax paid= corporate tax+Personal tax

= $3.51+$0.90

= $4.41

Hence the total amount of taxes paid is $4.41