The Dawg corporation owns 13% of Company A and 23% of Company B. Dividends received from...

The Dawg corporation owns 13% of Company A and 23% of Company B. Dividends received from Company A were $104,000 and from Company B were $243,000. If Dawg's "adjusted" taxable income is $2,000,000, calculate Dawg's taxable income after including the dividend information.

Expert Solution

In case of 13% owning:

Since this is less than 20%, there will be 70% deduction.

Therefore, the deduction amount = Dividends × 0.70

= $104,000 × 0.70

= $72,800

In case of 23% owning:

Since this is more than 20%, there will be 80% deduction.

Therefore, the deduction amount = Dividends × 0.80

= $243,000 × 0.80

= $194,400

Total deduction = 72,800 + 194,400 = $267,200

This is to be deducted from income to the answer.

Taxable income = Adjusted income – Total deduction

= $2,000,000 - $267,200

= $1,732,800 (Answer)

ekkarill92 answered 2 months ago

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