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Korolek [52]
3 years ago
14

Westside, Inc. owns 15% of Innsbrook's common stock. This year, Westside generated $50,000 operating income and received $20,000

dividends from Innsbrook. Westside's taxable income is:
Business
1 answer:
IgorLugansk [536]3 years ago
4 0

Answer:

a. $56.000

Explanation:

Westside is entitled to a 70% DRD, so income is $70.000 - $14.000 DRD.

<em>What is DRD? The dividends received deduction (DRD) is a federal tax deduction in the U.S. that is given to certain corporations that get dividends from related entities. The amount of the dividend that a company can deduct from its income tax is tied to how much ownership the company has in the dividend-paying company.</em>

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year           cash flow

0               -$795,000

1                 $375,000

2               -$500,000

3                $600,000

4                $400,000

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