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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.
- Summer '08