You are a shareholder in a corporation. The corporation e

Fill This Form To Receive Instant Help

trustpilot ratings

google ratings

Homework answers / question archive / You are a shareholder in a corporation

You are a shareholder in a corporation

Finance

Share With

You are a shareholder in a corporation.
The corporation earns $4 per share before taxes.
How much is left for you after all taxes are paid? What is your total effective tax rate
The corporate tax rate is 34% and the personal tax rate on dividend income is 15%.
Once it has paid taxes it will distribute the rest of its earnings to you as a dividend.

pur-new-sol

Purchase A New Answer

Custom new solution created by our subject matter experts

GET A QUOTE

Answer Preview

Solution
- - First, the corporation pays taxes. It earned $4 per share, but must pay 0.34 × $4 = $1.36 to the government in corporate taxes.
  - That leaves $2.64 to distribute. However, you must pay

0.15 × $2.64 = $0.396 in income taxes on this amount, leaving $2.64 – $0.396 = $2.244 per share after all taxes are paid.

- - As a shareholder you only end up with $2.244 of the original $4 in earnings. The remaining $1.36 + $0.396 = $1.756 is paid as taxes.
  - Thus, your total effective tax rate is $1.756 ÷ $4 = 43.9%.

Sitejabber (5.0)

BBC (5.0)

Trustpilot (4.9)

Google (5.0)

Related Questions