Question

Marathon Inc. (a C corporation) reported $1,950,000 of taxable income in the current year. During the year, it distributed $195,000 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.)

• $9,750 to Guy, a 5 percent individual shareholder.
• $29,250 to Little Rock Corp., a 15 percent shareholder (C corporation).
• $156,000 to other shareholders.

1. How much of the dividend payment did Marathon deduct in determining its taxable income?
2. Assuming Guy’s marginal ordinary tax rate is 37 percent, how much tax will he pay on the $9,750 dividend he received from Marathon Inc. (including the net investment income tax)?
3. What amount of tax will Little Rock Corp. pay on the $29,250 dividend it received from Marathon Inc. (50 percent dividends received deduction)?
   (Round your final answers to the nearest whole dollar amounts.)
4. Complete Form 1120 Schedule C for Little Rock Corp. to reflect its dividends received deduction (use the most recent Form 1120, Schedule C available).

5. On what line of Little Rock Corp.’s Form 1120 page 1 is the dividend from Marathon Inc. reported?

6. On what line of Little Rock Corp.’s Form 1120 page 1 is its dividends received deduction reported?
   (Assume 2019 form is same structure as 2018 form.)

Answer 1

* $o. A cooporcition 85 not allowed to deduct dadena dgrobalfoss PE makes to Pts shareholders * $ 232) Guy woceld pay tax on the drodend at a 23.89. taxdale C207. +3.84. net pavestment encome tax): Total des dend $ 9,750 x 23.8). - $ 2320.5 -> $2321 * $3071 tax... $29,250 doudend - $ 14,625 dilidends Deceded dedeection=$14,00 VILA taxable pootion of de send x 214. Cooperate fax sale = $ 3071•25 poended as $307) * IPHle Rock coop coll report the $ 29,250 dieedend on from 1120, page 1, Me H * LPtHe Rocle corp.will be poot P14,625 devedendo received deckelchion on foom 1120, page ), lhe 296 Cagsum png 2018 Form Ps same stoucture as 2017 foom)