1. The Chester Corporation has $250,000 of taxable income. It distributes

$100,000 of that income as a dividend to its sole shareholder whose other income places him in the 35 percent marginal tax bracket. What is the effective tax rate on the corporation’s $250,000 of taxable income?

a. 34 percent

b. 35 percent

c. 38.3 percent

d. 47.7 percent