Question

Superior Corporation reported taxable income of $1,000,000 in 20X3. Superior paid a dividend of $100,000 to its sole shareholder, Mary Yooper. Superior Corporation is subject to a flat rate tax of 21%. The dividend meets the requirements to be a "qualified dividend" and Mary is subject to a tax rate of 15% on the dividend. What is the total federal income tax imposed on the corporate income earned by Superior including taxes on the amount distributed to Mary as a dividend?

Answer 1

$225,000

Step-by-step explanation:

Federal corporate income tax (21% flat rate)

$1,000,000 x 21% = $210,000

Federal dividend tax (15%).

$100,000 x 15% = $15,000

Dividens are neither expenses nor deductible, so they do not reduce the amount of corporate taxable income. Therefore we must add up the two quantities.

$210,000 + $15,000 = $225,000