A company paid its annual dividends of $5.39 per share last week. The company expects to grow its dividends at the rate of 5.0 p
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Answer:
Wealthy's tax bill stand reduced by $168,000
Explanation:
These donations amount for complete deduction.
Income before deduction = $3,000,000
Tax rate = 42%
Therefore tax before deduction = $3,000,000 42% = $1,260,000
Since the donation is completely deductible:
Income after deduction = $3,000,000 - $400,000 = $2,600,000
Tax thereon:
$2,600,000 42% = $1,092,000
Reduction in tax paid = Tax paid without donation - Tax paid after donation
= $1,260,000 - $1,092,000 = $168,000