Leona, whose marginal tax rate on ordinary income is 39.6 percent, owns 100 percent of the stock of Henley Corporation. This year, Henley generates $1 million of taxable income. Use Appendix C and Corporate tax rate schedule.

1. If Henley wants to pay all of its after-tax earnings to Leona as a dividend, calculate the amount of the dividend payment.
2. Calculate Leona’s tax due on the dividend computed in part a, and her after-tax cashflow from the dividend receipt.
3. Compute the combine corporate and individual tax burden on Henley’s $1 million of current year income, and the effective combined tax rate on this income.