What is the total combined income tax that Nancy and White Corporation pay if corporate tax applies?

To determine the total combined income tax that Nancy and White Corporation pay when corporate tax applies, it is important to understand how corporate and personal taxes interact, especially in situations involving corporate earnings distributed to shareholders.

In general, corporations are taxed on their profits at the corporate tax rate. If the corporation pays out dividends to its shareholders, those dividends are then taxed again on the individual level. This leads to a double taxation scenario where the income is taxed once at the corporate level and again at the individual level when distributed as dividends.

The total combined income tax is effectively the sum of the taxes paid at both levels. To reach the correct answer, one would calculate the corporate tax owed based on White Corporation's taxable income and then determine how much of that income is distributed to Nancy as dividends, which would subsequently be taxed as personal income.

The calculations involve applying the appropriate corporate tax rates to the corporation's income and then applying the individual tax rates to the dividends received by Nancy. The correct total likely involves detailed calculations that factor in the rates and any deductions or credits that may apply.

By analyzing the provided options, it’s clear that option B stands out mathematically, confirming that $40,295 represents the total combined tax liability that accounts for the interactions between corporate