Firstly, we write down the tax slab rate table in standard form -
If taxable income is over.. | But not over… | The Tax is … | Marginal Tax rate |
$ - | $ 50,000 | 15% of the amount over $ 0 | 15% |
$ 50,001 | $ 75,000 | $7,500 plus 25% of the amount over $ 50,000 | 25% |
$ 75,001 | $ 100,000 | $13,750 plus 34% of the amount over $ 75,000 | 34% |
$ 100,001 | $ 335,000 | $22,250 plus 39% of the amount over $ 100,000 | 39% |
$ 335,001 | $ 10,000,000 | $113,900 plus 34% of the amount over $ 335,000 | 34% |
$ 10,000,001 | $ 15,000,000 | $3,400,000 plus 35% of the amount over $ 10,000,000 | 35% |
$ 15,000,001 | $ 18,333,333 | $ 5,150,000 plus 38% of the amount over $ 15,000,000 | 38% |
$ 18,333,334 | $6,416,666.54 Plus 35% of the amount over $ 18,333,334 | 35% |
with this we will calculate the tax liability of both companies before new project.
Corporation A - Tax liability before new project
A's Taxable income is $ 84,973
Thus, A's Tax liability = $ 13,750 + 0.34(84,973-75,000)
= $ 13,750 + $ 3,390.82
= $ 17,140.82
Corporation B - Tax liability before new project
B's Taxable Income = $ 9,300,000
Thus, B's Tax Liability = $ 113,900 + 0.34 ( 9,300,000 - 335,000)
= $ 3,162,000
Corporation-A - Tax liability after new project
A's taxable income = 84,973 + 11,550 = $ 96,523
Thus, A's Tax liability = 13,750 + 0.34(96,523 -75,000)
= $ 21,067.82
A's Additional tax for new project = 21,067.82 - 17,140.82 = $ 3,927
Corporation-B - Tax liability after new project
B's Taxable income = 9,300,000 + 11,550 = $ 9,311,550
B's Tax liability = 113,900 + 0.34 (9,311,550 - 335,000)
= $ 3,165,927
B's Additional tax for new project = 3,165,927 - 3,162,000 = $ 3,927
Additional tax liability of Both Corporations A and B due to new project is same i.e 3,927.
Thus, Corporation-B is not paying additional tax in excess of Corporatation-A
This is because both corporation A & B comes in a Tax bracket having equal Marginal tax rate i.e 34%
Corporation A has $84973 in taxable income, and Corporation B has $9.3 million in taxable income....
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The Anberin Co. had $305319 in 2015 taxable income. Use the tax rates from Table 2.3. Calculate the company's marginal tax rate TABLE 2.3 Taxable Income Corporate Tax Rates 50,000 75,000 100,000 100,001335,000 335,001-10,000,000 10,000,001-15,000,000 15,000,001-18,333,333 15% 25 34 39 34 35 38 35 50,001 75,001 18,333,334+
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