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Total Tax Paid By C Corp and Shareholders

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Please help with the following problem.

During the current tax year, Charlie Corporation generated gross income of $1,800,000 and had ordinary and necessary deductions of $1,300,000, resulting in taxable income of $500,000. If Charlie Corporation paid qualifying dividends of $200,000 to shareholders, all of whom are in the 25% marginal tax bracket, what is the total tax paid on both corporate income and the corporate dividends?

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Solution Summary

The following posting aids with an accounting problem. This solution illustrates how to determine the total amount of income taxes paid when a C corporation earns income and then pays dividends to its shareholders.

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Charlie Corporation's income tax liability was $170,000 based on the following computations:

Gross income $1,800,000
Ordinary and necessary deductions ( 1,300,000)
Taxable income $ 500,000

(The dividends are not deductible by the corporation, as they are considered to be distributions of corporate ...

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