Question

It is 2017. The company you founded called Mineral Gells had earnings before tax of $100,000,000 this year (congratulations!). You are the company’s sole owner. The corporate tax rate is 35%, you are in the 39.6% marginal bracket, and your dividends are taxed at 20%.

Mineral Gells is a C-corporation and pays out 50% of its income in the form of dividends. How much do you personally have to pay in taxes, and what is your after-tax dividend?

Answer 1

Total Income of Minerals Gells is $ 100,000,000

Less: Corporate Tax @35% $ 35,000,000   

Profit after Tax and available for distribution of Dividend $ 65,000,000

Dividend Rate 50% - Dividend received by sole onwer @ 50% of  $ 65,000,000 i.e. 32,500,000 less 20% dividend tax, means onwer's received $ 26,000,000 after tax as a dividend