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.) b. Assuming the facts in part (a), what is Riverbend’s effective tax rate on the dividend?

Answer #1

Answer:-

The dividends-received deduction^{[}is a tax deduction
received by a corporation on the dividends it receives by other
corporations in which it has an ownership stake.

if a corporation receives dividends from another corporation, it is entitled to a deduction of 50 percent of the dividend it receives.

If the corporation receiving the dividend owns 20 percent or more, then the amount of the deduction increases to 65 percent.

If, on the other hand, the corporation receiving the dividend owns more than 80 percent of the distributing corporation, it is allowed to deduct 100 percent of the dividend it receives.

So deduction for dividend is 305000*50% = 152,500

Based on its level of taxable income, Riverbend’s marginal tax rate is 34%. So, its marginal tax rate on the dividend after taking the DRD into account is computed as follows:

((305000-152500)*34%)/305000 = 17%

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.) a. What is Riverbend’s deductible
DRD assuming it owns 10 percent of Hobble Corporation?

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?

Riverbend Inc. received a $200,000 dividend from stock it held
in Hobble Corporation. Riverbend's taxable income is $2,100,000
before deducting the dividends received deduction (DRD), a $40,000
NOL carryover, and a $100,000 charitable contribution. Use Exhibit
16-6. (Round your tax rates to 1 decimal place. Leave no answer
blank. Enter zero if applicable.) Problem 16-48 Part a a. What is
Riverbend’s deductible DRD assuming it owns 10 percent of Hobble
Corporation?

Riverbend Inc. received a $372,500 dividend from stock it held
in Hobble Corporation. Riverbend's taxable income is $2,820,000
before deducting the dividends received deduction (DRD), a $47,500
NOL carryover, and a $146,000 charitable contribution. Use Exhibit
16-6.
a. What is Riverbend’s deductible DRD assuming
it owns 10 percent of Hobble Corporation?
b. Assuming the facts in part (a), what is
Riverbend’s marginal tax rate on the dividend?
c. What is Riverbend’s DRD assuming it owns 31
percent of Hobble Corporation?...

Riverbend Inc. received a $200,000 dividend from stock it held
in Hobble Corporation. Riverbend's taxable income is $2,100,000
before deducting the dividends received deduction (DRD), a $40,000
NOL carryover, and a $100,000 charitable contribution. Use Exhibit
16-6. (Round your tax rates to 1 decimal place. Leave no answer
blank. Enter zero if applicable.) Problem 16-48 Part e e. What is
Riverbend’s DRD assuming it owns 85 percent of Hobble Corporation
(and is part of the same affiliated group)?

Riverbend Inc.
received a $267,500 dividend from stock it held in Hobble
Corporation. Riverbend's taxable income is $2,440,000 before
deducting the dividends received deduction (DRD), a $27,750
domestic production activities deduction, and a $137,000 charitable
contribution. (Use Corporate Tax Rate Table.)
(Leave no answer blank. Enter zero if
applicable. Round Marginal tax rate to 1
decimal place.)
a. What is Riverbend’s deductible DRD assuming
it owns 16 percent of Hobble Corporation?
b.
Assuming the facts in part (a), what is...

Riverbend Inc. received a $252,500 dividend from stock it held
in Hobble Corporation. Riverbend's taxable income is $2,550,000
before deducting the dividends received deduction (DRD), a $41,500
NOL carryover, and a $104,000 charitable contribution. Use Exhibit
16-6. (Round your tax rates to 1 decimal place. Leave no
answer blank. Enter zero if applicable.)
EXHIBIT 16-6 Stock Ownership and Dividends Received
Deduction Percentage
Receiving Corporation’s Stock Ownership in
Distributing Corporation’s Stock
Dividends Received Deduction
Percentage
Less than 20 percent
50%...

Riverbend Inc. received a $372,500 dividend from stock it held
in Hobble Corporation. Riverbend's taxable income is $2,820,000
before deducting the dividends received deduction (DRD), a $47,500
NOL carryover, and a $146,000 charitable contribution. Use Exhibit
16-6. (Round your tax rates to 1 decimal place. Leave no
answer blank. Enter zero if applicable.)
XHIBIT 16-6 Stock Ownership and Dividends Received
Deduction Percentage
Receiving Corporation’s Stock Ownership in Distributing
Corporation’s Stock
Dividends Received Deduction Percentage
Less than 20 percent
50%...

Myer Inc. received a $200,000 dividend from stock it held in
Huckabee Corporation. Myer’s taxable income is $2,100,000 before
deducting the dividends received deduction (DRD), a $40,000 NOL
carryover and a $100,000 charitable contribution.
a. What is Myer’s deductible DRD assuming it owns 10 percent of
Huckabee Corporation?
b. What is Myer’s DRD assuming it owns 60 percent of Huckabee
Corporation?
c. What is Myer’s DRD assuming it owns 85% of Huckabee
Corporation (and is part of the same affiliated...

Compute HC Inc.’s current-year taxable income given the
following information relating to its 2019 activities. Also,
compute HC’s Schedule M-1 assuming that HC’s federal income tax
expense for book purposes is $30,000. Use Exhibit 16-6.
Gross profit from inventory sales of $310,000 (no book–tax
differences).
Dividends HC received from 28 percent-owned corporation of
$120,000 (this is also HC’s pro rata share of the corporation’s
earnings).
Expenses other than DRD, charitable contribution (CC),
and net operating loss (NOL), are $300,000 (no...

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