FIGURE 3.6 2018 Personal and 2018/2017 Corporate Federal Income Tax Rates PANEL A: 2018 CORPORATE FLAT TAX RATE TAXABLE INCOME: Taxed at a Flat Rate of 21% OVER- 0 50,000 75,000 100,000 335,000 10,000,000 15,000,000 18,333,333 OVER- TAXABLE INCOME PANEL B: 2017 CORPORATE MARGINAL INCOME TAX RATES TAXABLE INCOME BUT NOT OVER- BUT NOT OVER- 15% 25% 34% PANEL C: 2018 PERSONAL MARGINAL INCOME TAX RATES SINGLE 9,525 38,700 82,500 157,500 200,000 500,000 Chapter 3 Organizing and Financing a New Venture CORPORATE MARGINAL TAX RATE X 50,000 75,000 100,000 335,000 10,000,000 15,000,000 18,333,333 0 9,525 38,700 82,500 157,500 200,000 500,000 Source: Internal Revenue Service, http://www.IRS.gov. X X X MARGINAL TAX RATE 10% 12% 22% 24% 32% 35% 37% INCOME $ 50,000 25,000 25,000 $100,000 MARGINAL TAX RATE TAXABLE INCOME OVER- MARRIED FILING JOINTLY 0 19,050 77,400 165,000 315,000 400,000 600,000 CORPORATE TAXABLE BUT NOT OVER- Let's illustrate the tax liability for a corporation with a taxable income of $100,000. Based on Panel B in Figure 3.6, the marginal tax rate, which is the rate paid on the last dollar of income, would have been 34 percent. The average tax rate would have been calculated as the total tax liability divided by the dollar amount of taxable income as follows: 15% 25% 34% 39% 34% 35% 38% 35% 19,050 77,400 165,000 315,000 400,000 600,000 MARGINAL TAX RATE 10% 12% 22% 24% 32% 35% 37% CORPORATE AMOUNT OF TAXES $ 7,500 6,250 8,500 $22,250
FIGURE 3.6 2018 Personal and 2018/2017 Corporate Federal Income Tax Rates PANEL A: 2018 CORPORATE FLAT TAX RATE TAXABLE INCOME: Taxed at a Flat Rate of 21% OVER- 0 50,000 75,000 100,000 335,000 10,000,000 15,000,000 18,333,333 OVER- TAXABLE INCOME PANEL B: 2017 CORPORATE MARGINAL INCOME TAX RATES TAXABLE INCOME BUT NOT OVER- BUT NOT OVER- 15% 25% 34% PANEL C: 2018 PERSONAL MARGINAL INCOME TAX RATES SINGLE 9,525 38,700 82,500 157,500 200,000 500,000 Chapter 3 Organizing and Financing a New Venture CORPORATE MARGINAL TAX RATE X 50,000 75,000 100,000 335,000 10,000,000 15,000,000 18,333,333 0 9,525 38,700 82,500 157,500 200,000 500,000 Source: Internal Revenue Service, http://www.IRS.gov. X X X MARGINAL TAX RATE 10% 12% 22% 24% 32% 35% 37% INCOME $ 50,000 25,000 25,000 $100,000 MARGINAL TAX RATE TAXABLE INCOME OVER- MARRIED FILING JOINTLY 0 19,050 77,400 165,000 315,000 400,000 600,000 CORPORATE TAXABLE BUT NOT OVER- Let's illustrate the tax liability for a corporation with a taxable income of $100,000. Based on Panel B in Figure 3.6, the marginal tax rate, which is the rate paid on the last dollar of income, would have been 34 percent. The average tax rate would have been calculated as the total tax liability divided by the dollar amount of taxable income as follows: 15% 25% 34% 39% 34% 35% 38% 35% 19,050 77,400 165,000 315,000 400,000 600,000 MARGINAL TAX RATE 10% 12% 22% 24% 32% 35% 37% CORPORATE AMOUNT OF TAXES $ 7,500 6,250 8,500 $22,250
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
Related questions
Question
The Capital-Ideas Company is in its development stage and is deciding how to formally organize its business venture. The founder, Rolf Lee, is considering organizing as either a proprietorship or a corporation. He expects revenues to be $2 million next year with total expenses amounting to $1,625 million, resulting in a taxable income of $375,000. Rolf is interested in estimating his federal income tax liability based on the schedules contained in Figure 3.6.
Requirements:
1.If the Capital-Ideas Company is organized as a corporation and all after-tax profits are paid out as dividends to Rolf Lee, what additional personal income taxes would be paid?
2. What would be the marginal tax rate and the average tax rate on this personal income received from the corporation?
Transcribed Image Text:FIGURE 3.6 2018 Personal and 2018/2017 Corporate Federal Income Tax Rates
PANEL A: 2018 CORPORATE FLAT TAX RATE
TAXABLE INCOME: Taxed at a Flat Rate of 21%
OVER-
0
50,000
75,000
100,000
335,000
10,000,000
15,000,000
18,333,333
OVER-
TAXABLE INCOME
PANEL B: 2017 CORPORATE MARGINAL INCOME TAX RATES
TAXABLE INCOME
BUT NOT OVER-
BUT NOT OVER-
15%
25%
34%
9,525
38,700
82,500
PANEL C: 2018 PERSONAL MARGINAL INCOME TAX RATES
SINGLE
Chapter 3 Organizing and Financing a New Venture
157,500
200,000
500,000
CORPORATE
MARGINAL TAX RATE X
50,000
75,000
100,000
335,000
10,000,000
15,000,000
18,333,333
0
9,525
38,700
82,500
157,500
200,000
500,000
Source: Internal Revenue Service, http://www.IRS.gov.
X
X
MARGINAL
TAX RATE
10%
12%
22%
24%
32%
35%
37%
INCOME
$ 50,000
25,000
25,000
$100.000
MARGINAL TAX RATE
0
19,050
77,400
165,000
315,000
400,000
600,000
CORPORATE TAXABLE
MARRIED FILING JOINTLY
TAXABLE INCOME
OVER- BUT NOT OVER-
Let's illustrate the tax liability for a corporation with a taxable income of $100,000.
Based on Panel B in Figure 3.6, the marginal tax rate, which is the rate paid on
the last dollar of income, would have been 34 percent. The average tax rate would
have been calculated as the total tax liability divided by the dollar amount of taxable
income as follows:
15%
25%
34%
39%
34%
35%
38%
35%
19,050
77,400
165,000
315,000
400,000
600,000
=
MARGINAL
TAX RATE
10%
12%
22%
24%
32%
35%
37%
CORPORATE AMOUNT
OF TAXES
$ 7,500
6,250
8,500
$22.250
101
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