Griffin Corporation received $60,000 of dividend income from Eagle, Inc. Griffin owns 6 percent of the outstanding stock of Eagle. Griffin's marginal tax rate is 21 percent. a. Calculate Griffin's allowable dividends-received deduction and its after-tax cash flow as a result of the dividend from Eagle. b. How would your answers to requirement a change if Griffin owned 55 percent of the stock of Eagle? c. How would your answers to requirement b change if Griffin owned 85 percent of the stock of Eagle? Complete this question by entering your answers in the tabs below. Required A Required B Required C Calculate Griffin's allowable dividends-received deduction and its after-tax cash flow as a result of the dividend from Eagle. Dividends received deduction

Griffin Corporation received $60,000 of dividend income from Eagle, Inc. Griffin owns 6 percent of the outstanding stock of Eagle. Griffin's marginal tax rate is 21 percent. a. Calculate Griffin's allowable dividends-received deduction and its after-tax cash flow as a result of the dividend from Eagle. b. How would your answers to requirement a change if Griffin owned 55 percent of the stock of Eagle? c. How would your answers to requirement b change if Griffin owned 85 percent of the stock of Eagle? Complete this question by entering your answers in the tabs below. Required A Required B Required C Calculate Griffin's allowable dividends-received deduction and its after-tax cash flow as a result of the dividend from Eagle. Dividends received deduction

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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.
Haze Corporation, a calendar year C corporation, owns stock in Lava Corporation and has taxable income of $127,000 for the year before considering the dividends received deduction. In the current year, Lava Corporation pays Haze Corp a dividend of $172,000, which was considered in calculating the $127,000. What amount of dividends received deduction may Haze claim if it owns 15% of Lava's stock? A. $0 B. $111,800 C. $86,000 D. $63,500
Ron and Hermione formed Wizard Corporation on January 2. Ron contributed cash of $305,000 in return for 50 percent of the corporation's stock. Hermione contributed a building and land with the following fair market values and adjusted tax bases in return for 50 percent of the corporation's stock: (Leave no answer blank. Enter zero if applicable. Negative amount should be indicated by a minus sign.) Adjusted Tax FMV Basis $ 114,375 266,875 $ 30,500 122,000 Building Land $ 381,250 $ 152,500 Total To equalize the exchange, Wizard Corporation paid Hermione $76,250 in addition to her stock. Assume Hermione's adjusted tax basis in the land was $305,000. f. What amount of gain or loss does Hermione realize on the formation of the corporation? What amount, if any, does she recognize? Gain or loss realized Gain or loss recognized
Moore Corporation has 400 shares of stock outstanding that are owned equally by four unrelated shareholders. Moore redeems 100 shares from the shareholders as shown below for $600 per share. Each shareholder has a $180 per share basis for his stock. Moore Corporation's current and accumulated E&P at the end of the tax year is $150,000. what are the tax consequences of these redemptions?
15.Ron and Hermione formed Wizard Corporation on January 2. Ron contributed cash of $200,000 in return for 50 percent of the corporation’s stock. Hermione contributed a building and land with the following fair market values and adjusted tax bases in return for 50 percent of the corporation’s stock: (Leave no answer blank. Enter zero if applicable. Negative amount should be indicated by a minus sign.) FMV Adjusted Tax Basis Building $ 75,000 $ 20,000 Land 175,000 80,000 Total $ 250,000 $ 100,000 To equalize the exchange, Wizard Corporation paid Hermione $50,000 in addition to her stock. What amount of gain or loss does Ron recognize on the formation of the corporation? Gain or loss recognized
Dave LaCroix recently received a 10 percent capital and profits interest in Cirque Capital LLC in exchange for consulting services he provided. If Cirque Capital had paid an outsider to provide the advice, it would have deducted the payment as compensation expense. Cirque Capital's balance sheet on the day Dave received his capital interest appears below: Assets: Cash Investments Land Totals Liabilities and capital: Nonrecourse liabilities Tatsuki* Robert* Totals Tax basis $ Dave Basis 21,000 $ 180,000 130,000 230,000 $ 540,000 Answer is not complete. Tatsuki Robert $ 210,000 165,000 165,000 $ 540,000 *Assume that Tatsuki's basis and Robert's basis in their LLC interests equal their tax basis capital accounts plus their respective shares of nonrecourse liabilities. Note: Leave no answer blank. Enter zero if applicable. Fair Market Value e. Compute each member's tax basis in his LLC interest immediately after Dave's receipt of his interest if Dave receives only a profits interest. $…
Gopher Corporation began the year with a large amount of accumulated earnings and profits and ended the year reporting taxable income of $100,000. Gopher wants to distribute its after-tax earnings to its sole shareholder, Sven Anderson. The dividend would meet the requirements to be a qualified dividend, and Sven is subject to a tax rate of 15 percent on dividend income. What is the amount of the dividend distribution and how much income does Sven realize after taxes? Answer is not complete. Corporate income Corporate tax Dividend distribution to Seven Shareholder tax Total after tax income $100,000 $105,000 x $ 15,000
Ron and Hermione formed Wizard Corporation on January 2. Ron contributed cash of $305,000 in return for 50 percent of the corporation's stock. Hermione contributed a building and land with the following fair market values and adjusted tax bases in return for 50 percent of the corporation's stock: (Leave no answer blank. Enter zero if applicable. Negative amount should be indicated by a minus sign.) Adjusted Tax FMV Basis Building $ 114,375 266,875 $ 381,250 $30,500 Land 122,000 $ 152,500 Total To equalize the exchange, Wizard Corporation paid Hermione $76,250 in addition to her stock. Assume Hermione's adjusted tax basis in the land was $305,000. g. What adjusted tax basis does Wizard Corporation take in the land and building received from Hermione? Land Building Adjusted tax basis $ 53,375
18. Ron and Hermione formed Wizard Corporation on January 2. Ron contributed cash of $200,000 in return for 50 percent of the corporation’s stock. Hermione contributed a building and land with the following fair market values and adjusted tax bases in return for 50 percent of the corporation’s stock: (Leave no answer blank. Enter zero if applicable. Negative amount should be indicated by a minus sign.) FMV Adjusted Tax Basis Building $ 75,000 $ 20,000 Land 175,000 80,000 Total $ 250,000 $ 100,000 To equalize the exchange, Wizard Corporation paid Hermione $50,000 in addition to her stock. What is Hermione’s tax basis in the stock she receives in return for her contribution of property to the corporation?
19. Ron and Hermione formed Wizard Corporation on January 2. Ron contributed cash of $200,000 in return for 50 percent of the corporation’s stock. Hermione contributed a building and land with the following fair market values and adjusted tax bases in return for 50 percent of the corporation’s stock: (Leave no answer blank. Enter zero if applicable. Negative amount should be indicated by a minus sign.) FMV Adjusted Tax Basis Building $ 75,000 $ 20,000 Land 175,000 80,000 Total $ 250,000 $ 100,000 To equalize the exchange, Wizard Corporation paid Hermione $50,000 in addition to her stock. What adjusted tax basis does Wizard Corporation take in the land and building received from Hermione? Adjusted tax basis land and building?
Kristen, the president and sole shareholder of Egret Corporation, has earned a salary bonus of $264,500 for the current year. Because of the lower tax rates on qualifying dividends, Kristen is considering substituting a dividend for the bonus. Assume that the tax rates are 24% for Kristen and 21% for Egret Corporation. Round your answers to nearest dollar, if required. a. How much better off would Kristen be if she were paid a dividend rather than salary? If Kristen were paid a bonus, she would receive s 201,020✔ after taxes. If Kristen receives a dividend rather than salary, she would receive 224,825✔ after taxes. Thus, she would be better off by receiving the dividend Feedback Check My Work b. How much better off would Egret Corporation be if it paid Kristen a salary rather than a dividend? The net after-tax cost of the bonus for Egret Corporation would be s 7,975 X Therefore, Egret would be better off by s be s Check My Work 208,955✔ and the net after-tax cost for the dividend would…
Sean, a shareholder of Crimson Corporation, is in the 35% tax bracket. This year, he receives a $7,000 qualified dividend from Crimson. Sean has investment interest expense of $16,000 and net investment income of $9,000 (not including the qualified dividend). Assume that Sean does not expect to have any investment income in the foreseeable future. Should Sean treat the distribution as a qualified dividend (subject to a 15% tax rate) or classify it as net investment income?