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dividend to its sole shareholder Chen, who is 25 years old and single Vegetable Corporation has taxable income of $50,000 in

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Answer #1

a)Chen will have taxable income of $35400


Vegetable pays tax of $12,600 ($60,000 × 21%). It then distributes its after-tax income of $47,400 ($60,000 - $12,600) as a dividend to Chen. Chen has taxable income of $35,400 ($47,400 - $12,000 standard deduction). Chen's tax liability is zero since the dividend is subject to the favorable tax rates and Chen's taxable income is under $38,600.

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