Pear, Inc. owns 80% of Apple Corporation. During the current year, Apple reported operating income before tax of $400,000 and paid a dividend of $120,000. The income tax rate for each company is 40% and separate tax returns are prepared. What deferred income tax liability arising this year must be recognized in the consolidated balance sheet?

Question

Quizplus · Accepted Answer

Since Pear, Inc. owns 80% of Apple Corporation, the dividends received are subject to the dividends received deduction, which typically results in no deferred tax liability for the parent company in this scenario.

Pear, Inc Owns 80% of Apple Corporation