A. Bob Loblaw and Steve Holt get together to form a new corporation. They each own 50% of the stock. Neither is employed by the corporation. In the first year of operation, the corporation generates $100,000 of taxable income and pays $20,000 in dividends ($10,000 each to Bob and Steve). Assuming a 21% corporate tax rate, a 30% personal tax rate on ordinary income, and a 15% personal tax rate on dividend, how much corporate and personal tax will be paid? Corporate tax ______________________ Bob and Steve each pay tax ____________________ B. Same as A) but now assume that instead of a corporation they form a partnership. Instead of receiving dividends, Bob and Steve each withdraw $10,000 from the partnership (also known as a “draw”). Partnership tax ______________________ Bob and Steve each pay tax ____________________
A. Bob Loblaw and Steve Holt get together to form a new corporation. They each own 50% of the stock. Neither is employed by the corporation. In the first year of operation, the corporation generates $100,000 of taxable income and pays $20,000 in dividends ($10,000 each to Bob and Steve). Assuming a 21% corporate tax rate, a 30% personal tax rate on ordinary income, and a 15% personal tax rate on dividend, how much corporate and personal tax will be paid?
Corporate tax ______________________
Bob and Steve each pay tax ____________________
B. Same as A) but now assume that instead of a corporation they form a
Partnership tax ______________________
Bob and Steve each pay tax ____________________
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