Question

Westside, Inc. owns 15% of Innsbrook's common stock. This year, Westside generated $50,000 operating income and...

Westside, Inc. owns 15% of Innsbrook's common stock. This year, Westside generated $50,000 operating income and received $20,000 dividends from Innsbrook (not included in operating income).

Westside's taxable income is:

A) $60,000

B) $70,000

C) $50,000

D) $40,000

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

The company which receives the dividend from another company can claim DRD i.e dividend received deduction or dividend exclusions.

The dividends received deduction is a federal tax write-off for eligible corporations in the US that receive dividends from related entities.

The general rule states that the DRD is equal to 70% of the dividend received, but after the tax cuts and jobs act the deduction is reduced to 50% for less than 20% of holding of common stock.

Here the Westside Inc, owns 15% of common stock hence it will be allowed to claim 50% of deduction.

Hence $10000 (20000*50%) can be claimed as deduction.

Thus the taxable income = Operating income + Dividend income - Dividend recieved deduction

Taxable income = $50000 +$20000- $10000

Taxable income = $ 60000.

The correct option is -----A

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A) The firm has a gross profit of $100, operating income (EBIT) of $70, taxable income...
A) The firm has a gross profit of $100, operating income (EBIT) of $70, taxable income (EBT) of $65, net income of $45, total assets of $4,000, total equity of $1,200, and total sales of $200. What is net profit margin? B)The company has net income of $30,000 for the year and paid dividends of $40,000.  At the beginning of the year, the company had common stock of $50,000, paid-in surplus of $60,000, and retained earnings of $70,000. At the end...
4.JDog corporation owns stock in Oscar, Inc.  JDog received a $20,000 dividend from Oscar, Inc.  JDog owns 5...
4.JDog corporation owns stock in Oscar, Inc.  JDog received a $20,000 dividend from Oscar, Inc.  JDog owns 5 percent of the Oscar, Inc. stock. Oscar’s net income after tax for the year was $500,000. What temporary book-tax difference associated with the dividend will JDogreport for the current year (ignore the dividends received deduction)? (Enter any favorable difference as positive and an unfavorable difference as negative.) 5. JDog corporation owns stock in Oscar, Inc.  JDog received a $20,000 dividend from Oscar, Inc.  JDog owns 40...
Builtrite had sales of $900,000 and COGS of $280,000. In addition, operating expenses were calculated at...
Builtrite had sales of $900,000 and COGS of $280,000. In addition, operating expenses were calculated at 25% of sales. Builtrite also received dividends of $50,000 and paid out common stock dividends of $25,000 to its stockholders. A long-term capital gain of $70,000 was realized during the year along with a capital loss of $50,000 If Bullrite has experienced a long-term capital loss of 20,000 instead of 50,000 and still had 70,000 lon-term capital gain which of the following is correct?...
1)Presents Inc. acquired all of the outstanding common stock of Santa Co. on January 1, 2017,...
1)Presents Inc. acquired all of the outstanding common stock of Santa Co. on January 1, 2017, for $257,000. Annual amortization of $19,000 resulted from this acquisition. Presents reported net income of $70,000 in 2017 and $50,000 in 2018 and paid $22,000 in dividends each year. Santa reported net income of $40,000 in 2017 and $47,000 in 2018 and paid $10,000 in dividends each year. On the consolidated financial statements for 2017, a)what amount should have been shown for Equity in...
Question 6 Aim, Inc., has 10,000 shares of 5%, $100 par value, noncumulative preferred stock and...
Question 6 Aim, Inc., has 10,000 shares of 5%, $100 par value, noncumulative preferred stock and 40,000 shares of $1 par value common stock outstanding at December 31, 2013. There were no dividends declared in 2012. The board of directors declares and pays a $120,000 dividend in 2013. What is the amount of dividends received by the common stockholders in 2013? A. $20,000 B. $50,000 C. $70,000 D. $0
Griffin Corporation received $50,000 of dividend income from Eagle, Inc. Griffin owns 5 percent of the...
Griffin Corporation received $50,000 of dividend income from Eagle, Inc. Griffin owns 5 percent of the stock of Eagle. Griffin's marginal tax rate is 21 percent. a. Calculate Griffin's allowable dividends-received deduction and the tax due from the dividend received from Eagle after deducting DRD. b. How would your answers to part a change if Griffin owned 55 percent of the stock of Eagle? c. How would your answers to part b change if Griffin owned 85 percent of the...
Myer Inc. received a $200,000 dividend from stock it held in Huckabee Corporation. Myer’s taxable income...
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...
Primus, Inc., owns all outstanding stock of Sonston, Inc. For the current year, Primus reports net...
Primus, Inc., owns all outstanding stock of Sonston, Inc. For the current year, Primus reports net income (exclusive of any investment income) of $616,000. Primus has 50,000 shares of common stock outstanding. Sonston reports net income of $216,000 for the period with 40,000 shares of common stock outstanding. Sonston also has 5,000 stock warrants outstanding that allow the holder to acquire shares at $11.00 per share. The value of this stock was $22 per share throughout the year. Primus owns...
Mike Corporation, which owns stock in Red Corporation, had net operating income of $125,000 for the...
Mike Corporation, which owns stock in Red Corporation, had net operating income of $125,000 for the year. Red pays Mike a dividend of $100,000. Mike takes a dividends received deduction of $80,000. Which of the following statements is correct? a. Pearl owns less than 20% of Opal Corporation. b. None of the above c. Pearl owns more than 80% of Opal Corporation. d. Pearl owns 20% or more, but less than 80% of Opal Corporation.
Dividends on Preferred and Common Stock Sunbird Theatre Inc. owns and operates movie theaters throughout Florida...
Dividends on Preferred and Common Stock Sunbird Theatre Inc. owns and operates movie theaters throughout Florida and Georgia. Sunbird Theatre Inc. has declared the following annual dividends over a six-year period: 2011, $20,000; 2012, $36,000; 2013, $70,000; 2014, $90,000; 2015, $102,000 and 2016, $150,000. During the entire period ended December 31 of each year, the outstanding stock of the company was composed of 100,000 shares of cumulative preferred 1% stock, $30 par, and 400,000 shares of common stock, $20 par....
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT