Distributing all after-tax income as dividends

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George Judson is the sole shareholder and employee of Black Corporation, a C corporation that is engaged exclusively in engineering services. During the year, Black has gross revenues of $300,000 and operating expenses (excluding salary) of $100,000. Further, Black Corporation pays George a salary of $150,000. The salary is reasonable in amount and George is in the 35% marginal tax bracket irrespective of any income from Black. Assuming that Black Corporation distributes all after-tax income as dividends, how much total combined income tax do Black and George pay in the current year? (Ignore any employment tax considerations.)

a. $64,875.

b. $70,000.

c. $74,875.

d. $81,375.

e. None of the above.

Reference no: EM13154947

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