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 $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 amende 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 reported dividend income. Group of answer choices $825,000 $1,044,304 $485,100 $998,250

CONCEPTS IN FED.TAX.,2020-W/ACCESS
20th Edition
ISBN:9780357110362
Author:Murphy
Publisher:Murphy
Chapter14: Choice Of Business Entity—operations And Distributions
Section: Chapter Questions
Problem 53P
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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 $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 amende
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 reported dividend income.
Group of answer choices
$825,000
$1,044,304
$485,100
$998,250
Transcribed Image Text: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 $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 amende 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 reported dividend income. Group of answer choices $825,000 $1,044,304 $485,100 $998,250
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