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Glacier Company owns 70% of Guadalupe Company. During the current year Guadalupe reported net income of...

Glacier Company owns 70% of Guadalupe Company. During the current year Guadalupe reported net income of $500,000 and paid dividends of $200,000. The tax rate is 25%. Assume dividends received are deducted at 65% for ownership between 20% and 80%. What current tax liability is created by this dividend payment?

a. 12,250

b. 49,000

c. 17,500

d. 18,375

e. 73,500

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Answer #1

taxable dividends= 35% as 65% is deductible

= 35% of 200000

= $70000

Tax @25% = $17500

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