Red Corporation and White Corporation both calendar year C c

Red Corporation and White Corporation, both calendar year C corporations, are members of a controlled group of corporations. For the current year, Red has taxable income of $130,000, and White has taxable income of $200,000. Assume that the controlled group does not make an election regarding the apportionment of the marginal tax brackets.

Red Corporation\'s income tax liability is $  

White Corporation\'s income tax liability is $

Solution

Solution:

Red taxable income = $130,000

Income tax payable as per slab rate:

$25,000 x 15% =$3,750

$12,500 x 25% =$1,875

$12,500 x 34% =$3,125

$80,000 x 39% =$31,200

Total Income tax liability is $39,950

b. White taxable income = $200,000

Income tax payable as per slab rate:

$25,000 x 15% = $3,750

$12,500 x 25% = $1,875

$12,500 x 34% = $3,125

$150,000 x 39% = 58,500

Total Income Tax liability is $67,250