Question

During the current year, Swallow Corporation, a calendar year C corporation, has the following transactions. Income from operations Expenses from operations Dividends received from Brown Corporation $660,000 760,000 240,000 Click here to view the dividend received deduction table. a. Swallow Corporation owns 12% o Brown Corporation's stock. Swallow s taxable income deduction is after deducting the dividends received 70,000 Feedback after deducting the dividends b. Assume instead that Swallow Corporation owns 26% of Brown Corporation's stock. Swallows NOL received deduction is s EXHIBIT 3.2 Dividends Received Deduction Percentage of Ownership by Corporate Shareholder Less than 20% 20% or more (but less than 80%) 80% or more. The payor corporation must be a member of an affiliated group with the recipient corporation Deduction Percentage 50% 65% 1006

Answer 1

Answer:

a. Taxable Income = $42,000

b. Taxable Income = $28,000

Explanation:

Given

Income from operations $660,000

Expenses from operations $760,000

Dividends received from Brown Corporation $240,000

a.

Taxable Income is calculated

Dividend received + Income from operations - Expenses from Operations

Taxable Income = $240,000 + $660,000 - $760,000

Taxable Income = $140,000

Swallow Corp owns 12% of Browns Corporation stock;

And 12% is not up to 20% owned by Browns Corporation.

So. The Dividend Received is 70% of $140,000

Dividend = $98,000

Taxable Income = $140,000 - $98,000

Taxable Income = $42,000

b.

Dividend Received + Taxable Income (ii) = Taxable Income (i)

Where Taxable Income (I) = $140,000

Calculating Dividend

Dividend = 80% of $140,000

Dividend = $112,000

Taxable Income = $140,000 - $112,000

Taxable Income = $28,000

.