Crocker and Company (CC)is a C Corporation

question 70

Multiple Choice

Crocker and Company (CC) is a C corporation. For the year, CC reported taxable income of $550,000. At the end of the year, CC distributed all its after-tax earnings to Jimmy, the company's sole shareholder. Jimmy's marginal ordinary tax rate is 37 percent and his marginal tax rate on dividends is 23.8 percent, including the net investment income tax. What is the overall tax rate on Crocker and Company's pretax income?

• A)18.8%
• B)23.8%
• C)21%
• D)39.8%
• E)44.8%

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Definitions:

Accelerated Depreciation

A method of depreciation in which an asset loses value faster in the initial years of its useful life, with decreased amounts in later years.

Net Present Value

A method of evaluating investments by calculating the present value of future cash flows minus the initial investment cost, used to assess the profitability of an investment.

Cash Inflows

Money received by a business from its operational, investment, and financing activities.

Internal Rate

Often related to the internal rate of return (IRR), it's a metric used in financial analysis to estimate the profitability of potential investments.