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Corporate Finance

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Moderate

Double Taxation Computation for a Shareholder

CORPFN-TGL2AM

You have formed your family hip hop company as a C-Corporation. Your corporation pays out 50% of cash flow to you and 50% to your spouse every year. The corporation made \$10 million last year and is in the 35% tax bracket. You and your spouse file taxes jointly and under a special agreement with the IRS you pay a 25% flat tax on your income.

What is the total amount of taxes that you paid last year (include the corporate tax in your calculations)?

A

$3,500,000

B

$6,000,000

C

$2.500,000

D

$5,125,000