Question

Marathon Inc. (a C corporation) reported $1,850,000 of taxable income in the current year. During the year, it distributed $185,000 as dividends to its shareholders as follows: (New Corporate income tax rate has been mentioned as "21% on all taxable income" as per the recent change. Leave no answer blank. Enter zero if applicable.)

• $9,250 to Guy, a 5 percent individual shareholder.
• $27,750 to Little Rock Corp., a 15 percent shareholder (C corporation).
• $148,000 to other shareholders.

• How much of the dividend payment did Marathon deduct in determining its taxable income?
• Assuming Guy’s marginal ordinary tax rate is 37 percent, how much tax will he pay on the $9,250 dividend he received from Marathon Inc. (including the net investment income tax)?
• What amount of tax will Little Rock Corp. pay on the $27,750 dividend it received from Marathon Inc. (50 percent dividends received deduction)?(Round your final answers to the nearest whole dollar amounts.)

a. amount deductible=

b. tax paid=

c. tax paid=

Answer 1

Answers a> Amouente deductible - $0. As its a c corporation hence dividend distributed is not allowed as deduction b) Tax paid:- Dividend x Net investment Taxn 3 $4,250x (20% +3,8%) = $9,250 x 23.8% - Tave paid = $2,202 c) Toe paid = [Dividend received - 50% Dividends received lx Tax rape = $ 27750 - (27,750X50%)x 21% = ($ 27,750-$13,875.) x21% :: Tax paid = $13,875 x 21% = $2,914 a) Amount Deductible =$0 b) Tan paid = $2,202 e Tax paid = $2914