For the current year, Maple Corporation, a C corporation, reports taxable income
ID: 2397994 • Letter: F
Question
For the current year, Maple Corporation, a C corporation, reports taxable income of $255,000 before paying salary to its sole shareholder, Diane. Diane’s marginal tax rate on ordinary income is 35.9 percent (including the additional Medicare tax) and 18.8 percent on dividend income (including the 3.8% net investment income tax). If Maple pays Diane a salary of $200,000 but the IRS determines that Diane’s salary in excess of $125,000 is unreasonable compensation, what is the amount of the overall tax (corporate level + shareholder level) on Maple’s $255,000 pre-salary income? Assume Maple’s tax rate is 35 percent and it distributes all after-tax earnings to Diane. (Round your intermediate calculations and final answers to the nearest whole dollar amount.)
Explanation / Answer
Answer
maple corporation
particular amount taxable income before sale 225000 salary 125000 taxable income 100000 entity tax 35000 after - tax entity earning 65000 dianes - tax on dividends 12220 dianes - tax on salary 44875 overall tax 92095