Corporations face the following corporate tax schedule:
Taxable Income Tax on Base Rate
$ 0 - $ 50,000 $0 15%
$ 50,000 - $ 75,000 7,500 25%
$ 75,000 - $100,000 13,750 34%
$100,000 - $335,000 22,250 39%
Company Z has $80,000 of taxable income from its operations, $5,000 of interest income, and $30,000 of dividend income from preferred stock it holds in other corporations (70% of such dividends are excludable). What is Company Z's tax liability? (Hint: Tax on Base represents the tax liability on the maximum taxable income in the previous tax bracket. In other words, taxable income of $75,000 implies a tax liability of $13,750, which is the tax on base for the bracket $75,000 to $100,000 and is equivalent to a 15% tax on the first $50,000 and a 25% tax on the next $25,000. Note that this implies that only income within the $50,000 to $75,000 taxable income bracket is taxed at a 25% rate.)
a. $12,250
b. $13,750
c. $16,810
d. $20,210
e. $28,100