Corporate Taxes Suppose that in addition to the $5.5 million of taxable income from operations,Emily's Flowers,Inc.received $500,000 of interest on state-issued bonds and $300,000 of dividends on common stock it owns in Amy's Iris Bulbs,Inc.
Using the tax schedule in Table 2.3 what is Emily's Flowers' income tax liability?
What are Emily's Flowers' average and marginal tax rates on total taxable income?
A)$1,900,600, 34%, 34%, respectively
B)$1,972,000, 34%, 34%, respectively
C)$2,070,600, 34%, 34%, respectively
D)$2,142,000, 34%, 34%, respectively

Question

Quizplus · Accepted Answer

The taxable income from operations is $5.5 million. Interest on state-issued bonds is tax-exempt, so the $500,000 is not included in taxable income. Dividends received are partially exempt; typically, 70% of dividends are excluded from taxable income, so only 30% of $300,000 is taxable, which is $90,000. Therefore, the total taxable income is $5.5 million + $90,000 = $5.59 million. Using the tax schedule, the tax liability is calculated, and the average and marginal tax rates are both 34%.

Corporate Taxes Suppose That in Addition to the $5