Jabar Corporation, a C corporation, projects that it will have taxable income of $250,000 before...
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Jabar Corporation, a C corporation, projects that it will have taxable income of $250,000 before incurring any lease expenses. Jabars tax rate is 35 percent. Abdul, Jabars 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.
a. What is the amount of the overall tax (corporate level + shareholder level) on Jabar Corp.s $250,000 prelease expense income if Jabar Corp. distributes all of its after-tax earnings to its sole shareholder, Abdul (include the 3.8% net investment income tax on dividend and rental income.)?
b.
What is the amount of the overall tax on Jabar Corp.s $250,000 prelease expense income if Jabar leases equipment from Abdul at a cost of $24,600 for the year (include the net investment income tax on dividend and rental income.)?
c.
What is the amount of the overall tax on Jabar Corp.s $250,000 prelease expense income if Jabar Corp. leases equipment from Abdul at a cost of $24,600 for the year but the IRS determines that the fair market value of the lease payments is $17,500 (include the net investment income tax on dividend and rental income.)
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