Question

Corporate Tax Liability The Talley Corporation had taxable operating income of $330,000 (i.e., earnings from operating revenues minus all operating costs). Talley also had (1) interest charges of $50,000, (2) dividends received of $15,000, and (3) dividends paid of $30,000. Its federal tax rate was 21% (ignore any possible state corporate taxes). Recall that 50% of dividends received are tax exempt.

What is the after-tax income? Round your answers to the nearest dollar.

Answer 1

Particulars	Amount
Operating income	$      330,000
Dividends	$         15,000
Gross income	$      345,000
Less:
interest expense	$       (50,000)
Dividends received deduction	$         (7,500)
Taxable income	$      287,500
Less: taxes payable	$       (60,375)
	$      227,125
Add: dividends received deduction	$           7,500
After tax income	$      234,625