Corporation A has $86111 in taxable income, and Corporation B has $7.9 million i
ID: 2814030 • Letter: C
Question
Corporation A has $86111 in taxable income, and Corporation B has $7.9 million in taxable income. Using the tax rates from the table below, what is the difference between the tax bills of these two firms?
Taxable Income Tax rate
$0-50,000 15%
50,001-75,000 25%
75,001-100,000 34%
100,001-335,000 39%
335,001-10,000,000 34%
10,000,001-15,000,000 35%
15,000,001-18,333,333 38%
18,333,334 + 35%
Explanation / Answer
A:
Total taxes=(50000*0.15)+(25000*0.25)+(11,111*0.34)
=$17527.74
B:
Total taxes=(50000*0.15)+(25000*0.25)+(25000*0.34)+(235000*0.39)+(7565000*0.34)
=$2,686,000
Hence difference between tax bills =$2,686,000-$17527.74
=$2,668,472.26
NOTE:
The first $50000 is taxed at 15%; the next (75000-50000)=$25000 is taxed at 25% and so on.