Question

Before the provision for Federal income tax, Karas Corporation had book income of $400,000 for the current year. The book income included $100,000 of dividends received from a 15% owned domestic corporation. What was Karas Corporation's taxable income for the current year?a. $300,000b. $335,000c. $350,000d. $400,000

Answer 1

Answer:

correct option is c. $350,000

Explanation:

given data

book income = $400,000

dividends = $100,000

owned domestic corporation = 15%

to find out

Karas Corporation's taxable income for the current year

solution

we know here that Karas Corporation qualifies report  that dividends received deduction = 50 % of dividends from the taxable unaffiliated domestic corporation

so we here assumed that if paying corporation is unaffiliated

then receiving corporation owns less than =  20 %

so book net income before federal income tax = $400,000

and Dividends received deduction = 0.50 × $100,000 = $50,000

Taxable income will be = book net income before federal income tax - Dividends received deduction   .................1

put here value

Taxable income =  $400,000 - $50000

Taxable income =  $350,000

so correct option is c. $350,000