Question

A corporation has operating income of $75,000. What is its taxable income if it receives a $20,000 dividend from another corporation in which it has the following ownership?

a. 10% is:
b. 65% is:
c. 90% is:

Answer 1

Taxable income is $ 85000, $82000, and $75000

Step-by-step explanation:

Given operating income = $75000

The dividend received from other corporations = $20000

Dividend received is taxable as, if the percentage of ownership is less than 20 percent then the deduction is 50 percent. If between 20 percent to 80 percent then 65 percent deduction. If more than 80 percent then 100 percent deduction.

a.10 percent ownership.

Taxable income = 75000 + 20000(1 – 50%) = 85000

b.65 percent ownership.

Taxable income = 75000 + 20000(1 – 65%) = 82000

c.90 percent ownership.

Taxable income = 75000 + 20000(1 – 100%) = 75000