Calculate the corporation’s tax liability using the following corporate tax slabs:
Problem 2:
Read the following problem and calculate corporate tax. Show your working notes:
A company sells automobiles and spare parts. During the last financial year the company generated sales of $4 M.
Cost of goods sold was 1.5M and operating expense was 1.7 M. Also $300,000 was interest expense during the year.
The firm received $5,000 during the year in dividend income for 1000 shares of common stock that had been purchased three years previously. 70% of dividend income is tax deductible. However, the stock was sold towards the end of the year for $100 per share; its initial cost was $80 per share.
The company also sold land that had been recently purchased and had been held for only four months. The selling price of land was $55,000 and cost was $45,000.
Calculate the corporation’s tax liability using the following corporate tax slabs:
Upto $50,000 15%
50,001-75,000 25%
Above $75,000 34%
Surtax for profit:
$0 – $99,999 = 0%
$100,000– $335,000 = 5%
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