Rodger Owns 100% of the Shares in Trevor Inc Given These Assumptions, How Much Cash Does Rodger Have from C

question 39

Essay

Rodger owns 100% of the shares in Trevor Inc., a C corporation. Assume the following for the current year:
$$\begin{array} { | l | } \hline \text { Trevor Inc.'s pre-tax income } = \$ 16,000 \\\hline \text { Trevor Corp's marginal tax rate } = 35 \% \\\hline \text { Percentage of after-tax earnings retained by Trevor Corp } \\= 0 \% \text { (i.e. all after-tax earnings distributed) } \\\hline \text { Rodger's dividend tax rate } = 5 \% \\\hline\end{array}$$
Given these assumptions, how much cash does Rodger have from the dividend after all taxes have been paid?

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Definitions:

Insomnia

A sleep disorder characterized by difficulty falling or staying asleep, leading to significant distress or impairment in functioning.

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Substances that reduce the functioning of the nervous system, often leading to decreased arousal or stimulation in various areas of the brain.

Methylphenidates

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Amphetamines

A class of stimulant drugs that affect the central nervous system, commonly used to treat disorders such as ADHD and narcolepsy.