For a corporation that has a taxable income of $250,000, determine (a) the marginal tax rate, (b) the total taxes, and (c) the average tax rate.
What will be an ideal response?
(a) From Table 17.1, marginal tax rate = 39%
(b) Taxes = 0.15(50,000) + 0.25(75,000 – 50,000) + 0.34(100,000 - 75,000) +
0.39(250,000 – 100,000)
= $80,750
or
Taxes = 22,250 + 0.39(250,000 – 100,000)
= $80,750
(c) Average tax rate = (80,750/250,000)(100%) = 32.3%
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