Indicate the tax treatment for each of the following dividends received by a corporation that is a member of an affiliated group filing a consolidated tax return:

a.

Dividend received from a corporation that is 5%-owned by the group member.

b.

Dividend received from a corporation that is 100%-owned by the group member.

c.

Dividend received from a foreign corporation that is 80%-owned by the group's parent corporation.

d.

Dividend received from a life insurance company that is 100%-owned by the group's parent corporation.

e.

Dividend received from a corporation that is 50%-owned by the group member and 50%-owned by the group's parent corporation.

Examples of dividends received by a corporation

Tax treatment

a.

5%-owned by the group member.

b.

100%-owned by the group member.

2

c.

80%-owned by the group's parent corporation.

d.

Life insurance company that is 100%-owned by the group's parent corporation.

3

e.

50%-owned by the group member and 50%-owned by the group's parent corporation.

More Info

1.

The group member includes the dividend in its gross income but may not claim a dividends-received deduction for it.

2.

The distributee group member may exclude the intercompany dividend from gross income, claim no dividends-received deduction for it, and make a corresponding negative adjustment to their bases in the distributing corporation's stock.

3.

The distributee group member must include the dividend in its gross income but may claim a 100% dividends-received deduction.

4.

The distributee group member excludes the intercompany dividend from its gross income, cannot claim a dividends-received deduction, and makes a corresponding negative adjustment to its basis in the distributing corporation's stock.

5.

The group member includes the dividend in its gross income but may claim a 70% dividends-received deduction.