Homework Answers
a. Otter Corporation will be allowed a dividend received deduction equal to 50% of the dividends it received. It will pay tax of 21 % on the remaining portion of the dividends.
=> The corporation will pay 21% tax on the remaining portion of the dividend as the 21% is the federal corporate rate which is applicable to it.
=> Only 50% of the deduction is allowed to a corporate with less than 20% of ownership and the remaining dividend income is taxed at a flat rate of 21%.
b. Gerald must include in income all of the divideds. He will pay tax at the 15% rate.
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