The Talley Corporation had taxable operating income of $490,000 (i. E. , earnings from operating revenues minus all operating costs). Talley also had (1) interest charges of $60,000, (2) dividends received of $25,000, and (3) dividends paid of $40,000. Its federal tax rate was 21% (ignore any possible state corporate taxes). Recall that 50% of dividends received are tax exempt. What is the firm's taxable income?

Accounting, often known as accountancy, is the measurement, processing, and communication of financial and non-financial information about economic entities like businesses and corporations. The practise of recording, classifying, and summarising financial transactions for a business is known as accounting. It provides management with feedback on the status and performance of an organization's finances.

Calculation

You first need to determine Talley's taxable income:

Income after operating costs: $365,000.00

Less: Interest Expense -$50,000.00

Plus: Taxable Dividends Received $4,500.00

Only 30% of the $15,000 in dividends

are taxable.

Taxable Income: $319,500.00

Next you need to calculate your tax liability from Table 2-6

Corporate Tax Rates as of January 2008, on page 71

$319,500 falls into the $100,000 to $335,000 bracket so the corporate tax

would be: $22,250 + .39 ($319,500 - $100,000)

Base Amount plus marginal rate x difference between taxable income - lower base

Tax Liability = $107,855.00

Talley's marginal tax rate is 39% the rate on the last dollar of income subject to tax.

Talley's average tax rate is: Tax Liability / Amount of Income Subject to Tax

Average Tax Rate = $107,855/$319,500 = 33.76%

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