Charleston Corporation (CC) now operates as a "regular" corporation, but it is considering a switch to S Corporation status. CC is owned by 100stockholders who each hold 1% of the stock, and each faces a personal tax rate of 24%. The firm carns $3,000,000 per year before taxes, and sinceit has no need for retained earnings, it pays out all of its earnings as dividends. Assume that the corporate tax rate is 34% and the personal tax rateis 24%. How much more (or less) spendable income would each stockholder have if the firm elected S Corporation status?a. $7,752b. $2,472$9.732d $5,472& $3,000

Variables in the question:CC is owned by 100 shareholdersFirm's earnings=$3000,000 per year before…

Answered: Charleston Corporation (CC) now…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Rodger owns 100 percent of the shares in Trevor Incorporated a C corporation. Assume the following for the current year: Trevor Incorporated’s pretax income = $21,500 Percentage of after-tax earnings retained by Trevor Incorporated = 0% (i.e., all after-tax earnings distributed) Rodger’s dividend tax rate = 15% Given these assumptions, how much cash does Rodger have from the dividend after paying taxes on the distribution? (Round your intermediate calculations and final answer to whole number dollar amount.)
From a corporation's point of view, does the tax treatment of dividends and interest paid favor the use of debt financing or equity financing? O Debt financing Equity financing You bought 1,000 shares of Tund Corp. stock for $60.59 per share and sold it for $82.35 per share after a few years. How will your gain or loss be treated when you file your taxes? will O As a capital gain taxed at the long-term tax rate O As a capital gain taxed at the current ordinary-income tax rate Depreciation expenses directly affect a company's taxable income. An increase in depreciation expense will lead to a tax deducted from a company's earnings, thus leading to a operating cash flow. According to a tax law established in 1969, taxpayers must pay the The applicable tax rate for S corporations is based on the: Stockholders' individual tax rates O Corporate tax rate taxable income. It of the Alternative Minimum Tax (AMT) or regular tax.
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1)During the year, CDE Corporation earned enough profits to pay dividends to its shareholders. CDE is a C corporation. What are the tax consequences of this distribution? The corporation will increase their earnings and profits by the amount distributed. The corporation will reduce its taxable income by the amount distributed to the shareholders. The corporation will pay a flat tax of 21% on the amount distributed. The shareholders also include their dividends received in taxable income. There are no direct tax consequences for either the corporation or the shareholders. 20 Choose the response that correctly describes a guaranteed payment. A loan payment from the partnership to pay back a loan from a partner. A loan payment from the partner to pay back a loan from a partnership. A payment made to a partner from the profits of the partnership. A payment made to a partner without regard to the income of the partnership. 3)Which of the following expenses may a partnership…
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