HCA 420 Workshop One 1.5 Problems from Chapters 1 and 2 (Indiana)
Workshop One - 1.5 Problems from Chapters 1 and 2
2.1 Assume that Provident Health System a for-profit hospital, has $1 million in taxable income for 2011, and its tax rate is 30 percent.
2.2 A firm that owns the stock of another corporation does not have to pay taxes on the entire amount of dividends received. In general, only 30 percent of the dividends received by one corporation from another are taxable. The reason for this tax law feature is to mitigate the effect of triple taxation, which occurs when earnings are first taxed at one firm, then its dividends paid to a second firm are taxed again, and finally the dividends paid to stockholders by the second firm are taxed yet again. Assume that a firm with a 35 percent tax rate receives $100,000 in dividends from another corporation. What taxes must be paid on this dividend, and what is the after-tax amount of the dividend?
2. 3 John Friedman is in the 40 percent personal tax bracket. He is considering investing in HCA bonds that carry a 12 percent interest rate.
2.4 Jane Smith currently holds tax-exempt bonds of Good Samaritan Healthcare that pay 7 percent interest. She is in the 40 percent tax bracket. Her broker wants her to buy some Beverly Enterprises taxable bonds that will be issued next week. With all else the same, what rate must be set on the Beverly Bonds to make Jane interested in making a switch?
2.5 George and Margaret Wealthy are in the 48 percent tax bracket, considering both federal and state personal taxes. Norman Briggs, the CEO of Community General Hospital, has been aggressively pursuing the couple to contribute $500,000 to the hospital’s soon-to-be-built Cancer Care Center. Without the contribution, the Wealthy’s taxable income for 2011 would be for $2 million. What impact would the contribution have on the Wealthy’s 2011 tax bill?