Question

A company wants to set up operations in a country with the following corporate tax rate structure: Taxable Income Tax Rate <$50,000 15% $50,000 - $75,000 25% $75,000 - $100,000 34% >$100,000 39% Therefore, a taxable income of $60,000 would result in taxes due of $50,000*0.15 + ($60,000-$50,000)*0.25 = $50,000*0.15 + $10,000*0.25 = $10,000 If the compay expects gross revenues of $500,000, $450,000 in total costs, $30,000 in allowable tax deductions and $15,000 in a one-time business start-up credit, how much should the company expect to pay in taxes?

Answer 1

Answer:The company should pay $3,000 in taxes

Explanation:

Taxable Income= Gross Revenues -Total cost- Allowable Deduction

=$ 500,000 –$ 450,000 - $30,000=  $20,000

Gross Tax Liability=Given that the  taxable income and tax rate as  

<$50,000--- 15%

$50,000 - $75,000 ----25%

$75,000 - $100,000----34%

>$100,000----- 39%

Our calculate taxable income is less than <50,000, ie $20,000 from our Gross revenue

The  gross tax liability, will now be  15% of $20,000=0.15 x 20,000= $3000

The company should pay $3,000 in taxes