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had lived under a classical tax system, which of the following is closest to the additional tax she would have to pay as a Rio shareholder?

had lived under a classical tax system, which of the following is closest to the additional tax she would have to pay as a Rio shareholder?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Samantha lives under an imputation tax system, Her income tax rate is 30%, which applies to all of her income, including wages, interest income and dividend income, Samantha owns 1000 shares of Rio Inc. which has 3.2 billion shares outstanding and taxable income of $1.8 billion (in the current year), Rio's pays corporate tax rate at 28% and its payout ratio in the past has been 60%. Rio has just announced that it will maintain the past payout ratio and all dividends (to be paid next month) will be fully franked. Given this information, if Samantha had lived under a classical tax system, which of the following is closest to the additional tax she would have to pay as a Rio shareholder? O $45.25 O S66.15 O None of the other answers O $72.90 O $82.45 On 10th March 2022 SS Inc. (an Australian listed firm that pays corporate tax rate of 30%) announced that it is conducting an off-market share buyback under tax determination TD2004/22. SS announced the buyback price to be $8.50 per share with capital component of $2.55 and the remainder treated as a fully franked dividend. Deemed consideration for the buyback has been determined to be $9.17. The current market (exchange) price of SS shares is $8.75. Tim Mayall is an Australian resident for tax purposes with a marginal tax rate of 45%. He purchased 1000 shares of SS Inc. at $6.50 per share in January 2020. He has recently decided to sell 60% of his SS shares to fund a long overdue holiday. He is trying to decide whether to sell his shares into the buyback or alternatively to sell them on the exchange. Using the approach discussed in the lecture, which of the following statement correctly describes the net proceeds received by Tim after he sells his shares? O Tim will be better off by $168.45 if he sells the shares over the exchange. O Tim will be better off by $280.75 if he sells the shares over the exchange. O None of the other answers is correct. O Tim will be worse off by $168.45 if he sells the shares over the exchange. O Tim will be indifferent between selling the shares over the exchange and into the buyback.
Transcribed Image Text:Samantha lives under an imputation tax system, Her income tax rate is 30%, which applies to all of her income, including wages, interest income and dividend income, Samantha owns 1000 shares of Rio Inc. which has 3.2 billion shares outstanding and taxable income of $1.8 billion (in the current year), Rio's pays corporate tax rate at 28% and its payout ratio in the past has been 60%. Rio has just announced that it will maintain the past payout ratio and all dividends (to be paid next month) will be fully franked. Given this information, if Samantha had lived under a classical tax system, which of the following is closest to the additional tax she would have to pay as a Rio shareholder? O $45.25 O S66.15 O None of the other answers O $72.90 O $82.45 On 10th March 2022 SS Inc. (an Australian listed firm that pays corporate tax rate of 30%) announced that it is conducting an off-market share buyback under tax determination TD2004/22. SS announced the buyback price to be $8.50 per share with capital component of $2.55 and the remainder treated as a fully franked dividend. Deemed consideration for the buyback has been determined to be $9.17. The current market (exchange) price of SS shares is $8.75. Tim Mayall is an Australian resident for tax purposes with a marginal tax rate of 45%. He purchased 1000 shares of SS Inc. at $6.50 per share in January 2020. He has recently decided to sell 60% of his SS shares to fund a long overdue holiday. He is trying to decide whether to sell his shares into the buyback or alternatively to sell them on the exchange. Using the approach discussed in the lecture, which of the following statement correctly describes the net proceeds received by Tim after he sells his shares? O Tim will be better off by $168.45 if he sells the shares over the exchange. O Tim will be better off by $280.75 if he sells the shares over the exchange. O None of the other answers is correct. O Tim will be worse off by $168.45 if he sells the shares over the exchange. O Tim will be indifferent between selling the shares over the exchange and into the buyback.
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