Rodger Owns 100% of the Shares in Trevor Inc $= \$ 16,000$

question 10

Essay

Rodger owns 100% of the shares in Trevor Inc., a C corporation. Assume the following for the current year: Trevor Inc.'s pre-tax income $= \$ 16,000$
Trevor Corp's marginal tax rate $= \mathbf { 3 5 \% }$
Percentage of after-tax earnings retained by Trevor Corp $= 0 \%$ (i.e., all after-tax earnings distributed)
Rodger's dividend tax rate $= \mathbf { 5 } \%$ Given these assumptions, how much cash does Rodger have from the dividend after all taxes have been paid?

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Definitions:

Scrap Value

The estimated resale value of an asset at the end of its useful life.

Heavy Equipment

Larger, more specialized pieces of machinery used in construction, mining, and heavy industry, such as bulldozers, cranes, and excavators.

Sum-Of-The-Years-Digits

A depreciation method that results in a more accelerated write-off of assets than the straight-line method, involving adding the digits of the years of an asset's useful life.

Heavy Equipment

Large machinery used in construction, mining, and manufacturing, essential for executing large-scale tasks.