Calculate the Amount of Dividends from a Corporation After Tax
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You are a shareholder in a corporation. The corporation earns $2 per share before taxes. Once it has paid taxes, it will distribute the rest of its earnings to you as a dividend. the corporation tax rate is 40% and the personal tax rate on both dividend and non-dividend income is 30%.
A. How much is left for you after all taxes are paid?
B. Repeat above problem assumming the corporation is an S corporation.
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Solution Summary
The solution calculates the amount of dividends from a corporation after tax.
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A. Earnings before tax = $2.00 per share
Corporation Tax @40% = $0.80 per share
Earnings after corporation tax = $1.20 per share
Income received at the hand of the investor = $1.20 per ...
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