Question

The following information is from Robin Hood Inc.

Advertising Expenses	$ (400,000)
Capital Gains	$ 150,000
Capital Losses (this year)	$ (200,000)
Capital Losses (prior year)	$         -
Cost of Goods Sold	$ (4,000,000)
Dividend "A" income	$    200,000
Dividend "B" income	$      100,000
Dividend "C" income	$         50,000
General and Admin Expenses	$ (1,300,000)
Interest Expense	$ (500,000)
Sales	$9,000,000

1. Calculate Robin’s interest expense deduction assuming the following:

Adjusted taxable income                    $ 35,000,000

                Business interest income                    $   1,000,000

                   Business interest expense                  $ 15,000,000

2. How much of the dividend income is taxable?
3. Assuming taxable income is $3,500,000, calculate Robin’s tax liability.

Answer 1