Question
Riverbend Inc. received a $335,000 dividend from stock it held in Hobble Corporation. Riverbend's taxable income is $2,700,000 before deducting the dividends received deduction (DRD),
Riverbend Inc. received a $335,000 dividend from stock it held in Hobble Corporation. Riverbend's taxable income is $2,700,000 before deducting the dividends received deduction (DRD), a $75,500 NOL carryover, and a $121,000 charitable contribution.
b. Assuming the facts in part (a), what is Riverbends effective tax rate on the dividend?
c. What is Riverbends DRD assuming it owns 44 percent of Hobble Corporation?
d. Assuming the facts in part (c), what is Riverbends marginal tax rate on the dividend?
e. What is Riverbends DRD assuming it owns 89 percent of Hobble Corporation (and is part of the same affiliated group)?
f. Assuming the facts in part (e), what is Riverbends marginal tax rate on the dividend?
EXHIBIT 16-6 Stock Ownership and Dividends Received Deduction Percentage Receiving Corporation's Stock Ownership in Distributing Corporation's Deduction Distributing Corpoioiidends Stock Percentage Less than 20 percent 50% 65 At least 20 percent but less than 80 percent 80 percent or more22 100Step by Step Solution
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