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    Taxable income and tax liability

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    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.

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    Solution Preview

    The taxable income is 701,500 and the tax liability comes to $238,510

    Fair Corporation?Corporate Income Tax
    Sales $5,000,000
    Cost of Goods Sold (4,300,000)
    Gross ...

    Solution Summary

    The solution explains how to calculate the taxable income and tax liability