Question

A company wants to set up operations in a country with the following corporate tax rate structure: Taxable Income Tax Rate <$50,000 15% $50,000 - $75,000 25% $75,000 - $100,000 34% >$100,000 39% Therefore, a taxable income of $60,000 would result in taxes due of $50,000*0.15 + ($60,000-$50,000)*0.25 = $50,000*0.15 + $10,000*0.25 = $10,000 If the compay expects gross revenues of $400,000, $100,000 in total costs, $60,000 in allowable tax deductions and $12,000 in a one-time business start-up credit, how much should the company expect to pay in taxes?

Answer 1

Taxable income = $240,000

Amount payable = $64,850

Step-by-step explanation:

As per the data given in the question,

Taxable income :

Gross revenue = $400,000

Total cost = $100,000

Net profit = $400,000 - $100,000 = $300,000

Allowable tax deduction = $60,000

Taxable income = $300,000 - $60,000

= $240,000

Tax to be paid :

Computation of tax Amount to be taxed Rate Tax

$50,000 $50,000 15% $7,500

$50,000 to $75,000 $25,000 25% $6,250

$75,000 to $100,000 $25,000 34% $8,500

More than $100,000 $140,000 39% $54,600

Total tax $76,850

Amount payable = Total tax - Tax credit

= $76,850 - $12,000

=$64,850