None 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

Calculate Coconut's reported dividend income with these steps: Step 1: Determine the gross-up…

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
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
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?
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
Sandra would like to organize LAB (a legal corporation) as either an S corporation or a C corporation for tax purposes. In either form, the entity is expected to generate an 8 percent annual before-tax return on a $1,075,000 investment. Sandra's marginal income tax rate is 37 percent and her tax rate on qualified dividends and net capital gains is 20 percent. LAB's income is not qualified business income (QBI), so Sandra is not allowed to claim the QBI deduction. Assume that LAB will distribute all of its earnings after entity-level taxes every year. Ignore the additional Medicare tax and the net investment income tax when computing your answers. Note: Round your intermediate computations to the nearest whole dollar amount. a. How much cash after taxes would Sandra receive from her investment in the first year if LAB is organized as either an S corporation or a C corporation? b. What is the overall tax rate on LAB's income in the first year if LAB is organized as an S corporation or as…
Teal Corporation, with E & P of$2,000,000, distributes property with a basis of $150,000 and a fair market value of $400,000 to Grace. She owns 15% of the outstanding Teal shares. What are the tax consequences to Teal Corporation and to Grace if the distribution is a nonqualified stock redemption? What are the tax consequences in part (a) if Grace is a corporation? What are the tax consequences to Teal Corporation and to Grace if the distribution is a qualifying stock redemption? Assume that Grace’s basis in the redeemed shares is $90,000. What are the tax consequences in part (c) if Grace is a corporation?
Sandra would like to organize LAB (a legal corporation) as either an S corporation or a C corporation for tax purposes. In either form, the entity is expected to generate an 8 percent annual before-tax return on a $500,000 investment. Sandra's marginal income tax rate is 37 percent and her tax rate on qualified dividends and net capital gains is 20 percent. LAB's income is not qualified business income (QBI), so Sandra is not allowed to claim the QBI deduction. Assume that LAB will distribute all of its earnings after entity-level taxes every year. Ignore the additional Medicare tax and the net investment income tax when computing your answers. Note: Round your intermediate computations to the nearest whole dollar amount. a. How much cash after taxes would Sandra receive from her investment in the first year if LAB is organized as either an S corporation or a C corporation? S corporation C corporation After tax cash flow Show Transcribed Text Mason (single) is a 50 percent shareholder…
Sandra would like to organize LAB (a legal corporation) as either an Scorporation or a C corporation for tax purposes. In either form, the entity isexpected to generate an 8 percent annual before-tax return on a $500,000investment. Sandra marginal income tax rate is 37 percent and her tax rateon qualified dividends and net capital gains is 20 percent. LAB income is notqualified business income (QBI), so Sandra is not allowed to claim the QBIdeduction. Assume that LAB will distribute all of its earnings after entity-leveltaxes every year. Ignore the additional Medicare tax and the net investmentincome tax when computing your answers. a. How much cash after taxes would Sandra receive from her investment inthe first year if LAB is organized as either an S corporation or a Ccorporation?
Stewart Holdings Ltd. is a Canadian controlled private corporation (CCPC) that has a fiscal period of November 1 to October 31. Stewart Holdings Ltd. has taxable income of $275,000 in the current year and has a policy of always claiming the small business deduction on its tax return each year. Mr. Steve Stewart is the sole shareholder of Stewart Holdings Ltd. Steve has not been too involved in the preparation of the corporate income tax returns in the past neither is aware of the rules under the Income Tax Act, so he has several questions for you about the administrative requirements for income tax purposes for his corporation, Stewart Holdings Ltd. A few weeks after filing the corporation’s tax return, Mr. Stewart receives a Notice of Assessment from Canada Revenue Agency that indicates that changes were made to the current year’s tax return for Stewart Holdings Ltd. Mr. Stewart does not agree with the changes made by Canada Revenue Agency and would like to dispute the matter.…
Sandra would like to organize LAB (a legal corporation) as either an S corporation or a C corporation for tax purposes. In either form, the entity is expected to generate an 8 percent annual before - tax retum on a $500, 000 investment. Sandra's marginal income tax rate is 37 percent and her tax rate on qualified dividends and net capital gains is 20 percent, LAB's income is not qualified business income (OBI), so Sandra is not allowed to claim the QBI deduction. Assume that LAB will distribute all of its earnings after entity level taxes every year. Ignore the additional Medicare tax and the net investment income tax when computing your answers. Note: Round your intermediate computations to the nearest whole dollar amount. b. What is the overall tax rate on LAB's income in the first year if LAB is organized as an S corporation or as a C corporation? Note: Round your final answers to 2 decimal places..
Logan, a 50-percent shareholder in Military Gear Incorporated (MG), is comparing the tax consequences of losses from C corporations with losses from S corporations. Assume MG has a $118,000 tax loss for the year, Logan's tax basis in his MG stock was $159,000 at the beginning of the year, and he received $84,000 ordinary income from other sources during the year. Assuming Logan's marginal tax rate is 24 percent, how much more tax will Logan pay currently if MG is a C corporation compared to the tax he would pay if it were an S corporation? Multiple Choice O O о $0 6,000 20,160 14,160

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