A Business Generates Profit of $100,000

question 30

Multiple Choice

A business generates profit of $100,000. The owner has a 37% marginal tax rate. What amount of corporate and individual income tax will be paid on this profit if the business is a regular corporation and no income is distributed?

• A) Corporate tax, $21,000; individual tax, $37,000
• B) Corporate tax, $21,000; individual tax, $0
• C) Corporate tax, $0; individual tax, $37,000
• D) Corporate tax, $21,000; individual tax, $15,800

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Definitions:

Stock Repurchase

The process by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares.

Cash Dividends

Payments made by a corporation to its shareholders out of its profits or reserves in the form of cash.

Tax Laws

are the legal rules and regulations governing how individuals, businesses, and other entities are taxed by the government.

Capital Gains

The profit from the sale of a capital asset, such as stocks or real estate, over its purchase price.