Question

Riverbend Inc. received a $305,000 dividend from stock it held in Hobble Corporation. Riverbend's taxable income is $2,380,000 before deducting the dividends received deduction (DRD), a $78,000 NOL carryover, and a $132,000 charitable contribution. Use Exhibit 16-6. (Round your tax rates to 1 decimal place. Leave no answer blank. Enter zero if applicable.) d. Assuming the facts in part (c), what is Riverbend’s marginal tax rate on the dividend?

Answer 1

Solution:

Riverbend's changed assessable pay for the assessable pay impediment is $2,248,000 ($2,380,000 - $132,000 altruistic commitment).

Along these lines, the assessable salary restrain is $1,798,400 ($2,248,000 x 80%).

Since the full $244,000 DRD is not as much as the assessable wage constrain, Riverbend may deduct the whole $160,000 DRD.

In light of its level of assessable salary, Riverbend's minimal duty rate is 34%. Along these lines, its minor assessment rate on the profit subsequent to considering the DRD is figured as pursues:

Marginal tax rate = [($305,000 - $244,000) x .34]/$305,000

Marginal tax rate = 6.8%

NOTE: I am explained the whole on the accompanying supposition - Riverbend possesses 20 percent or more however under 80% of Hobble. Subsequently its DRD rate is 80%. In this way, its full DRD is $244,000 (.8 x $305,000).