ABC Corporation owns 20% of DEFs stocks and receives $3,500 in dividend income. It is in the 34% marginal tax bracket, and its average tax rate is 25%.

5. Since ABC Corporation is invested 20% in DEFs stocks, _____ of the dividend income will be taxed.

a. 0%

b. 35%

c. 65%

d. 100%

6. The tax on the dividend income alone is equal to _____.

a. $1,190

b. $773.50

c. $262.50

d. $416.50