A public corporation earns $500,000 in pre-tax profits and pays out all of its after-tax earnings in dividends.The corporate tax rate is 27.5% and the sole shareholder is in a 50% tax bracket.The dividend gross-up rate is 1.38 and the total dividend tax credit (federal and provincial) is 27.5%.
Required:
A) Calculate the tax liability for 1) the corporation and 2) the shareholder.
B) Briefly explain how this tax structure illustrates the theory of integration.

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The Answer of A public corporation earns $500,000 in pre-tax profits and pays out all of its after-tax earnings in dividends.The corporate tax rate is 27.5% and the sole shareholder is in a 50% tax bracket.The dividend gross-up rate is 1.38 and the total dividend tax credit (federal and provincial) is 27.5%.
Required:
A) Calculate the tax liability for 1) the corporation and 2) the shareholder.
B) Briefly explain how this tax structure illustrates the theory of integration.

A Public Corporation Earns $500,000 in Pre-Tax Profits and Pays