Question

Discussion (LO. 1, 2) Marmot Corporation pays a dividend of $100,000 in the current year. Otter Corporation, a calendar year C corporation, owns 15% of Marmot's stock. Gerald, an individual taxpayer in the 24% marginal bracket, also owns 15% of Marmot's stock. Compare and contrast the treatment of the dividend by Otter Corporation and Gerald. Click here to view the dividend received deduction to use for this question. a. Otter Corporation will be allowed a equal to % of the dividends it received. It will pay tax of % on of the dividends. b. Gerald must include in income . He will pay tax at the % rate.

Answer 1

Answer:

The correct response will be:

(a) 15%, 21%

(b) 15%

Explanation:

(a)

Otter Company would be entitled to subtract a dividend received equal to 50% including its dividends it obtained. For the continued membership including its dividends, these will pay an income tax of 21 percent.

• The organization would then expect to be paid 21 percent tax mostly on the remaining part including its dividend while the federal income rate that is applied to it would be 21 percent.
• A business but with much less than 20 percent investment is given just 50 percent including its allowance as well as the additional dividend revenue is exempted from taxes of 21 percent.

(b)

Gerald would have all the split ones in sales. At either the 15 percent rate, he is going to pay tax.