What is the amount of the overall tax

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Reference no: EM131852096

Jabar Corporation, a C corporation, projects that it will have taxable income of $300,000 before incurring any lease expenses. Jabar’s tax rate is 35 percent. Abdul, Jabar’s sole shareholder, has a marginal tax rate of 39.6 percent on ordinary income and 20 percent on dividend income. Jabar always distributes all of its after-tax earnings to Abdul. (Input all answers as positive numbers. Do no round any intermediate percentages. Round your answers to the nearest whole dollar amount. Leave no answer blank. Enter zero if applicable.)

b. What is the amount of the overall tax on Jabar Corp.’s $300,000 pre-lease expense income if Jabar leases equipment from Abdul at a cost of $30,000 for the year (include the net investment income tax on the dividend and on the rental income received by Abdul)?

Taxable income before lease payment $300,000

Lease payment 30,000

Taxable income $270,000

Entity Tax 94,500

After-tax entity earnings $175,500

Abdul’s tax on dividends___

Abdul’s tax on lease payment___

Overall Tax___

Reference no: EM131852096

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