week 1 solutions

# week 1 solutions - I2-50a.Salary\$ 60,000S corporation...

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Unformatted text preview: I2-50a.Salary\$ 60,000S corporation income40,000Adjusted gross income\$100,000Itemized deductions( 18,000)Personal exemption( 3,300)Taxable income\$ 78,700Gross tax\$ 16,368b.Corporation:Taxable income\$ 40,000Gross tax (0.15 x \$40,000)\$ 6,000Individual:Salary\$ 60,000Dividend (\$40,000 - \$6,000)34,000Adjusted gross income\$ 94,000Itemized deductions( 18,000)Personal exemption( 3,300)Taxable income\$ 72,700Gross tax\$ 11,333*Total tax (\$6,000 + \$11,333)\$ 17,333*The individual’s gross tax is the total of the tax on the dividend income and the tax on the remaining income. The tax on the dividend income of \$34,000 is \$5,100 (0.15 x \$34,000). The tax on the remaining income of \$38,700 (\$72,700 - \$34,000) is \$6,233 computed using the rate schedule for single taxpayers.c.The answer to part a is unchanged as the shareholder is taxed on the S corporation’s income regardless of whether it is distributed. In part b, the corporation’s tax is the same, \$6,000, but the shareholder is only taxed on the salary of \$60,000.Adjusted gross income\$ 60,000Itemized deductions( 18,000)Personal exemption( 3,300)Taxable income\$ 38,700Gross tax\$ 6,233Total tax (\$6,000 + \$6,233)\$ 12,233The shareholder will be taxed on the corporation’s undistributed income if it is paid out as a dividend in a future year....
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## This note was uploaded on 09/01/2008 for the course ACC 537 taught by Professor Matais during the Summer '08 term at University of Phoenix.

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week 1 solutions - I2-50a.Salary\$ 60,000S corporation...

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