The Fair Corporation had sales of $ 5 million this past year. The cost of goods sold was $ 4.3 million, and operating costs were $ 100,000. Dividend income totaled $ 5,000. The firm sold land for $ 150,000 that had cost $ 100,000 5 months ago. The firm received
$ 150 per share from the sale of 1000 shares of stock. The stock was purchased for
$ 100 per share 3 years ago. Determine the corporation's taxable income and its tax liability.
Taxable income is basically determined as income less allowable exclusions and tax-deductible expenses
Seventy percent of any dividends received from another corporation are tax exempt
Dividends paid by the corporation to its stockholders are not tax deductible
Corporate rate structure:
15% $0 - $50,000
25% $50,001 - $75,000
34% $75,001 - 100,000
There is an added tax of 5% for income between $100,000 and $335,000.
There is also an additional added tax of 3% on income between $15 million and $18 1/3 million.
The taxable income is 701,500 and the tax liability comes to $238,510
Fair Corporation?Corporate Income Tax
Cost of Goods Sold (4,300,000)
The solution explains how to calculate the taxable income and tax liability