You own 100 shares of a "C" corporation. The corporation earns $4.00 per share before taxes. Once the corporation has paid any corporate taxes that are due, it will distribute the rest of its earnings to its shareholders in the form of a dividend. If the corporate tax rate is 20% and your personal tax rate on (both dividend and non-dividend) income is 20%, then how much money is left for you after all taxes have been paid?

Individual Tax is paid on dividend received from the investment in the shares. The corpporation declare the dividend after deducting the corporate tax.

Amount of Earning = Number of shares x Per share earning = 100 shares x $4per share = $400

Earning After tax = Amount of Earning x ( 1 - Individual Tax rate )

Earning After tax = $400 x ( 1 - 0.20 )

Earning After tax = $400 x 0.8

Earning After tax = $320

fichoh fichoh · Answer 2 · 2020-03-25T12:03:28+01:00

Answer: $320

Explanation:

Given the following ;

Number of shares = 100

Earning per share = $4

Corporate tax rate = 20%

Individual tax rate(dividend and nin-dividend) = 20%

Income accrued by shareholders of a corporation are subjected to double taxation, first is the corporate tax paid by the corporation and then the personal tax paid individually after shareholders have received their dividend.

Total earning = earning per share × number of shares

Total earning = $4 × 100 = $400

Personal tax rate of 20% (dividend and non-dividend)

Tax amount = (20 ÷ 100) × $400

Tax amount = 0.2 × $400 = $80

Amount left after taxes = $400 - $80 = $320