Question
In: Accounting
Griffin Corporation received $50,000 of dividend income from Eagle, Inc. Griffin owns 5 percent of the...
Griffin Corporation received $50,000 of dividend income from
Eagle, Inc. Griffin owns 5 percent of the outstanding stock of
Eagle. Griffin’s marginal tax rate is 21 percent.
Calculate Griffin’s allowable dividends-received deduction and its after-tax cash flow as a result of the dividend from Eagle.
How would your answers to a change if Griffin owned 55 percent of the stock of Eagle?
How would your answers to b change if Griffin owned 85
percent of the stock of Eagle?
Solutions
Expert Solution
When stock own is 5%
| Particulars | Amount | Amount |
| Dividends received | 50,000 | |
| Percentage deduction | 70% | |
| Deduction | 35,000 | |
| Taxable dividends | 15,000 | |
| Tax on dividends | 3,150 | 3,150 |
| After tax cash flow | 46,850 |
When stock owned is 55%
| Particulars | Amount | Amount |
| Dividends received | 50,000 | |
| Percentage deduction | 80% | |
| Deduction | 40,000 | |
| Taxable dividends | 10,000 | |
| Tax on dividends | 2,100 | 2,100 |
| After tax cash flow | 47,900 |
When stock owned is 85%
| Particulars | Amount | Amount |
| Dividends received | 50,000 | |
| Percentage deduction | 100% | |
| Deduction | 50,000 | |
| Taxable dividends | - | |
| Tax on dividends | - | - |
| After tax cash flow | 50,000 |
ekkarill92 answered 1 year agoRelated Solutions
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