McGraw-Hill's Taxation of Individuals and Business Entities 3rd Edition by Brian Spilker, Benjamin Ayers, John Robinson, Edmund Outslay, Ronald Worsham, John Barrick, Connie Weaver

Exercise 13

For the current year, Maple Corporation, a C corporation, reports taxable income of $200,000 before paying salary to its sole shareholder Diane.Diane's marginal tax rate on ordinary income is 35 percent and 15 percent on dividend income.If Maple pays Diane a salary of $150,000 but the IRS determines that Diane's salary in excess of $80,000 is unreasonable compensation, what is the amount of the double income tax on Maple's $200,000 pre-salary income? Assume Maple's tax rate is 35 percent and it distributes all after-tax earnings to Diane.