Question

QUESTION 3

Consider a C corporation. The corporation earns $11 per share before taxes. After the corporation has paid its corresponding taxes, it will distribute 41% of its earnings to its shareholders as a dividend. The corporate tax rate is 43%, the tax rate on dividend income is 29%, and the personal income tax rate is set at 27%. What are the shareholder's earnings from the corporation after all corresponding taxes are paid?

Answer 1

Particulars	Amount	Calculations
Corporation EBT	$   11.00
Corporation Tax @43%	$      4.73	11*43%
Net Income	$      6.27	11-4.73
Income Distributed as Div (41%)	$      2.57	6.27*41%
Div Tax @29% on Div	$      0.75	2.57*29%
Div received by Stock Holder	$      1.83	2.57-0.75
Personal Tax @27%	$      0.49	1.83*27%
Net Amount recived after Tax	$      1.33	1.83-0.49

Share holder's earnings after all taxes is $ 1.33