a. Since, Riverbend Inc. owns less than 20% of Hobble Corporation, its DRD percentage is 70%.
Its full DRD = 70% of $217,500 = $152,250
Riverbend's adjusted taxable income for taxable income limitation = Taxable income before DRD - Charitable contribution = $2,350,000 - $103,000 = $2,247,000
Taxable Income limit = 70% of $2,247,000 = $1,572,900
Since the full DRD ( $152,250) is less than the taxable income limit($1,572,900), hence full DRD of $152,250 is deductible.
b. Assuming the year is 2019. Based on its level of taxable income,
Riverbend's marginal tax rate is 37%.
Hence, Riverbend’s marginal tax rate on the dividend after taking
DRD = [($217,500 - 152,250)*37%]/ $217,500 = 11.1%
Marginal tax rate on dividend is 11.1%.
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