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Question 7.1 in CMP

B

benny wang

Member
Hi

The question is simple enough.

the following figures apply to a proprietary life insurance company

BLAGAB I-E 520
OTLB profit 260

minimum profit is 300, of which 250 is shareholders'(S/H) unfranked income

calculated the amount of corporation tax payable.

However I don't understand the answer.

I get that S/H unfranked income and OLTB profit is taxed at 24%
so we have

(250+260)*0.24= 122.4

I am assuming the remaining of the minimum profit (50) is the dividend income, which from the page 4 in chapter 7, does not suffer any further tax.

Therefore, shouldn't the amount of profit paying 20% tax be 220 (520-300), rather than 270 (520-250) as given in the answer to this question. The answer implies the BLAGAB dividend income also pays 20% tax?

Thanks
 
Nevermind

I understand the answer now. Dividend income is not in the BLAGAB I-E to start off with.

We are deducting shareholders unfranked income from BLAGAB I-E. with the sum suffering 20% tax
 
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