Falcon Ltd. received the following dividends during the year for its December 31, 2017 taxation year:...
Falcon Ltd. received the following dividends during the year for its December 31, 2017 taxation year:
Dividend from Corporation A which Falcon has a 5% interest in $150,000
Dividend from a wholly owned subsidiary corporation B $90,000
Dividend from a wholly owned subsidiary corporation C $60,000
Further Information
Corporation B received a $20,000 dividend refund as a result of paying the above dividend
Corporation C received no dividend refund as a result of paying the above dividend
What is the minimum Part IV tax (i.e., Part 4 tax) which Falcon Ltd will have to report for December 31, 2017?
Homework Answers
Solution:
The minimum Part IV tax which Falcon Ltd will have to report for December 31, 2017 is $77,000
Explanation:
The dividends from a 5% owned subsidiary A are taxed in full.
The dividends from subsidiary B are taxed less the $20,000 refund.
The dividends from subsidiary C are taxed in full.
The total taxable dividends for Falcon Ltd are $150,000 + $70,000 + $60,000 = $280,000
The corporate tax rate is 27.5%.
The tax to be paid will be 27.5%*$280,000 = $77,000
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