Coconut, an individual, has a 35% marginal tax rate and owns 100% of the stock of TropicalCorporation, a C Corporation for federal tax purposes. This year, Tropical Corporationgenerated $6,600,000 of taxable income, paid $1,386,000 of corporate income tax, and paid a$825,000 dividend to Coconut. Suppose that the federal income tax system has been amendeto allow shareholders to gross up dividend income by the corporate tax paid with respect tothe dividend and credit this tax against their individual tax. Further assume that dividends-received by individuals are not eligible for a preferential tax rate. Assuming the corporate taxrate is 21%, calculate Coconut's reported dividend income.Group of answer choices$825,000$1,044,304$485,100$998,250

The concept of grossing up dividend income refers to the process of increasing the amount of…

Answered: Coconut, an individual, has a 35%…

SWFT Individual Income Taxes

43rd Edition

ISBN:9780357391365

Author:YOUNG

Publisher:YOUNG

Chapter20: Corporations And Parterships

Section: Chapter Questions

Problem 49P

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Coconut, an individual, has a 35% marginal tax rate and owns 100% of the stock of Tropical Corporation, a C Corporation for federal tax purposes. This year, Tropical Corporation generated $2,800,000 of taxable income, paid $588,000 of corporate income tax, and paid a $350,000 dividend to Coconut. Suppose that the federal income tax system has been amended to allow shareholders to gross up dividend income by the corporate tax paid with respect to the dividend and credit this tax against their individual tax. Further assume that dividends-received by individuals are not eligible for a preferential tax rate. Assuming the corporate tax rate is 21%, calculate Coconut's tax due on the dividend. Group of answer choices $3,500 $122,500 $74,725 $62,025
Gopher Corporation reported taxable income of $500,000 this year. Gopher paid a dividend of $100,000 to its sole shareholder, Sven Anderson. The dividend meets the requirements to be a qualified dividend, and Sven is subject to a tax rate of 15 percent on the dividend. What is the income tax imposed on the corporate income earned by Gopher and the income tax on the dividend distributed to Sven? Corporate tax Shareholder tax Total income tax
Crocker and Company (CC) is a C corporation. For the year, CC reported taxable income of $563,000. At the end of the year, CC distributed all its after-tax earnings to Jimmy, the company's sole shareholder. Jimmy's marginal ordinary tax rate is 37 percent and his marginal tax rate on dividends is 23.8 percent, including the net investment income tax. What is the overall tax rate on Crocker and Company's pretax income?
During the year, CDE Corporation earned enough profits to pay dividends to its shareholders. CDE is a C corporation. What are the tax consequences of this distribution? (a) The corporation will increase their earnings and profits by the amount distributed. (b) The corporation will reduce its taxable income by the amount distributed to the shareholders. (c) The corporation will pay a flat tax of 21% on the amount distributed. The shareholders also include their dividends received in taxable income. (d) There are no direct tax consequences for either the corporation or the shareholders.
American Corporation has two equal shareholders, Mr. Freedom and Brave Incorporated. In addition to their investments in American stock, both shareholders have made substantial loans to American. During the current year, American paid $160,000 interest each to Mr. Freedom and Brave Incorporated. Assume that American and Brave have 21 percent tax rates, and Mr. Freedom’s marginal tax rate on ordinary income is 37 percent. Recalculate Brave’s tax cost and after-tax earnings assuming its receipt of interest from American is treated as a constructive dividend. Recalculate Mr. Freedom’s tax cost and after-tax earnings assuming his receipt of interest from American is treated as a constructive dividend.
1)During the year, CDE Corporation earned enough profits to pay dividends to its shareholders. CDE is a C corporation. What are the tax consequences of this distribution? The corporation will increase their earnings and profits by the amount distributed. The corporation will reduce its taxable income by the amount distributed to the shareholders. The corporation will pay a flat tax of 21% on the amount distributed. The shareholders also include their dividends received in taxable income. There are no direct tax consequences for either the corporation or the shareholders. 20 Choose the response that correctly describes a guaranteed payment. A loan payment from the partnership to pay back a loan from a partner. A loan payment from the partner to pay back a loan from a partnership. A payment made to a partner from the profits of the partnership. A payment made to a partner without regard to the income of the partnership. 3)Which of the following expenses may a partnership…
American Corporation has two equal shareholders, Mr. Freedom and Brave, Incorporated. In addition to their investments in American stock, both shareholders have made substantial loans to American. During the current year, American paid $200,000 interest each to Mr. Freedom and Brave, Incorporated. Assume that American and Brave have 21 percent tax rates, and Mr. Freedom's marginal tax rate on ordinary income is 37 percent. Required: a. Calculate American's tax savings from deduction of these interest payments and their after-tax cost. b. Calculate Brave's tax cost and after-tax earnings from its receipt of interest income from American. c. Calculate Mr. Freedom's tax cost and after-tax earnings from his receipt of interest income from American. e. Recalculate Brave's tax cost and after-tax earnings assuming its receipt of interest from American is treated as a constructive dividend. f. Recalculate Mr. Freedom's tax cost and after-tax earnings assuming his receipt of interest from…
David would like to organize HOS (a business entity) as either an S corporation or as a corporation (taxed as a C corporation) generating a 12 percent annual before-tax return on a $372,000 investment. David’s marginal tax rate is 24 percent and the corporate tax rate is 21 percent. David’s marginal tax rate on individual capital gains and dividends is 15 percent. HOS will pay out its after-tax earnings every year to either its members or its shareholders. If HOS is taxed as an S corporation, David’s business income allocation would be subject to a 3.8 percent net investment income tax (he is a passive investor in the business), and the business income allocation would qualify for the deduction for qualified business income. (Round your intermediate calculations and final answer to whole number dollar amount.) a. How much would David keep after taxes if HOS is organized as either an S corporation or a C corporation? b. What are the overall tax rates (combined owner and entity level)…
Q is the sole shareholder of the T Corporation. At the beginning of the current year, Q’s basis in the T stock is $16,000. During the current year, Q receives a distribution of land from the corporation. The land’s tax basis is $10,000 and its fair value is $50,000. Assume a corporate tax rate of 21%. The corporation’s total earnings and profits is $18,000 at year-end, before taking into account any of the effects of the distribution. 1. Calculate T Corporation’s taxable gain, net of tax, if any. 2. Calculate Q's dividend income amount for the year. Show work for partial credit
Relix, Inc., is a domestic corporation. Relix, Inc., reported two permanent differences between book and taxable income. It earned $2,375 in tax-exempt municipal bond interest, and it incurred $780 in nondeductible business meals expense. Relix's book income before tax is $4,800. Assume a 21% Federal corporate tax rate. Provide the information for the income tax footnote rate reconciliation for Relix. For dollar amounts, round to the nearest dollar and use rounded amounts in subsequent computations. For the percentage answers, round to four decimal places before converting to a percentage. For example, round .56329 to .5633 and enter as 56.33%. Dollars Percentage Tax on book income at U.S. statutory rate % Tax-exempt income % Nondeductible business meals % Provision for income tax expense %
Jose, who is in the 35 percent marginal tax bracket with a 15 percent tax rate on dividends, owns 100 percent of the stock of JJ, Incorporated. This year, JJ generates $545,000 taxable income and pays a $108,000 dividend to Jose. Compute his tax on the dividend under each of the following assumptions: Required: a. The federal tax rules currently in effect apply to the dividend payment. b. The federal tax system has been amended to allow shareholders to gross up dividend income by the corporate tax paid with respect to the dividend and credit this tax against their individual tax. Complete this question by entering your answers in the tabs below. Required A Required B Compute his tax on the dividend assuming the federal tax system has been amended to allow shareholders to g dividend income by the corporate tax paid with respect to the dividend and credit this tax against their individua Tax on the dividend
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