Island Corporation has the following income and expense items for the year:
$\begin{array}{|l|l|}
\hline \text { Gross receipts from sales } & \$ 60,000 \
\hline \text { Dividends received from 15-\%owned domestic corporation } & 40,000 \
\hline \text { Expenses connected with sales } & 30,000\\hline
\end{array}$ The taxable income of Island Corporation is

Question

Quizplus · Accepted Answer

Taxable income is calculated as gross receipts from sales minus expenses connected with sales, plus dividends received. Therefore, $60,000 - $30,000 + $40,000 = $70,000. However, only 50% of dividends from a 15%-owned domestic corporation are taxable, so $20,000 is taxable. Thus, $30,000 + $20,000 = $50,000.

Island Corporation Has the Following Income and Expense Items for the Year