Question

Ernest, an individual, receives $100 from Vernon Corp. in dividends and is in the 28% tax bracket. Vernon Corp. already paid corporate taxes on the $100 at a 20% tax rate. How much in personal taxes will Ernest need to pay?

$28
$20
$0
$8

Answer 1

Ernest must pay additional = $28

Step-by-step explanation:

given data

receives dividends = $100

tax bracket = 28%

tax rate = 20%

to find out

personal taxes Ernest need to pay

solution

as we know that dis advantages of a corporate structure is that corporation paying its own taxes burden on the net income

so here the stockholder pay the income tax on dividend as they receive

so here Ernest must pay additionally = $28