What is Raptor's PHC tax, assuming that it does not pay any dividends?
Raptor Corporation is a PHC for 2009 and reports $200,000 of taxable income on its federal income tax return.
Operating profit $100,000
Long-term capital gain 80,000
Dividends (20%-owned corporation) 90,000
Interest 100,000
Gross income 370,000
Salaries expense (50,000)
General and administrative expense (25,000)
Dividends-received deduction (58,500)
Taxable income $236,500
Regular tax liability $ 49,665
Taxable income 223,000
Less: federal tax (49,665)
Less: Net capital gain (net of taxes)* (63,200)
Plus DRD 58,500
PHCI 168,635
PHC Tax (0.20 tax rate × 163,635) 33,727
* 80,000 - (80,000 * .21) = 63,200
Page Ref.: C:5-21 and C:5-22
Objective: 2
22) Mullins Corporation is classified as a PHC for the current year, reporting $263,000 of taxable income on its federal income tax return:
Operating profit $150,000
Long-term capital gain 20,000
Short-term capital gain 20,000
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