Triangle Associates is contemplating making a large charitable contribution. If their tax rate is 40%, what is the after-tax cost of making a $150,000 contribution?
A) $210,000
B) $ 60,000
C) $150,000
D) $ 90,000

Question

Quizplus · Accepted Answer

The after-tax cost of making a $150,000 contribution is equal to the contribution amount minus the tax savings. The tax savings will be equal to the tax rate multiplied by the contribution amount. Therefore, the after-tax cost is:

$150,000 - (0.4 x $150,000)
= $150,000 - $60,000
= $90,000

Thus, the best choice is D.

Triangle Associates Is Contemplating Making a Large Charitable Contribution