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:

Noncallable

A bond or other financial instrument that cannot be redeemed or paid off before its specified maturity date by the issuer.

Par Value

The face value of a bond or stock, representing the amount to be returned to the holder at maturity.

Annual Coupon

The yearly interest payment paid to bondholders, typically expressed as a percentage of the bond's face value.

Maturity

Maturity is the date on which the principal amount of a loan, bond, or other financial instrument is due to be paid in full.