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1. Gold Corporation is a C corporation with net income of $125 million during the year...

1. Gold Corporation is a C corporation with net income of $125 million during the year ended December 2018. If Gold Corps paid dividends of $25 million to its shareholders- Emma, Krista, Sandy, Maureen and Christina, the corporation’s income tax liability will be…

a) $21 million

b) $26.25 million

c) $43.75 million

Please show your calculations.

2. As a rule, is C corporations allowed to use the cash method of accounting? Please discuss this rule and exceptions to this rule. What tax form is C Corp. required to file and when?

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Answer #1

Answer 1

Dividends to each shareholder=$25 million

No of shareholder = 5

Total Dividends = 25*5=$125 million

Tax on dividends for C corp = 21%

Hence Tax = 21%*125=$26.25 Hence option b is correct

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