Interest versus dividend income Depot Logistics Inc. has declared pretax income from its operations of $560,000. In addition, it also received interest payment of

$40,000 on bond stock held in Warehouse PLC. During the year, it also received

$40,000 in income from dividends on its 20% common stock holding in Zephir PLC. Depot Logistics is in the 30% tax bracket and is eligible for a 70% dividend exclusion on its Zephir PLC stock.

a. Calculate the tax liability for Depot Logistics on its operating income.

b. Calculate the tax and after-tax income attributable to the interest income received on account of bond stock, from Warehouse PLC.

c. Find the tax and after-tax income owing to the dividend income received on account of common stock, from Zephir PLC.

d. Compare and comment on the after-tax amounts resulting from the interest income and dividend income calculated in parts b and c.

e. What is the firm’s total tax liability for the year?