Marginal tax rate on ordinary income

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Reference no: EM131453399

For the current year, Custom Craft Services Inc. (CCS), a C corporation, reports taxable income of $225,000 before paying salary to Jaron the sole shareholder. Jaron’s marginal tax rate on ordinary income is 33 percent and 15 percent on dividend income. Assume CCS’s tax rate is 34 percent. How much total income tax will Custom Craft Services and Jaron pay (combining both corporate and shareholder level tax) on the $225,000 of income if CCS pays Jaron a salary of $150,000 and distributes its remaining after-tax earnings to Jaron as a dividend (ignore the net investment income tax)?

Reference no: EM131453399

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