Marathon Inc. (a C corporation) reported $1,000,000 of taxable income in the current year. During the year it distributed $100,000 as dividends to its shareholders as follows:
• $5,000 to Guy a 5% individual shareholder.
• $15,000 to Little Rock Corp. a 15% shareholder (C corporation)
• $80,000 to other shareholders.
a. How much of the dividend payment did Marathon deduct in determining its taxable income?
b. Assuming Guy's marginal ordinary tax rate is 35%, how much tax will he pay on the $5,000 dividend he received from Marathon Inc.?
c. Assuming Little Rock Corp.'s marginal tax rate is 34%, what amount of tax will it pay on the $15,000 dividend it received from Marathon Inc. (70% dividends received deduction)?
d. Complete Form 1120 Schedule C for Little Rock Corp. to reflect its dividends received deduction.
e. On what line of Little Rock Corp.'s Form 1120 page 1 is the dividend from Marathon Inc. reported and on what line of Little Rock Corp.'s Form 1120 is its dividends received deduction reported.