![Corporation A owns 10% of Corporation C. The marginal tax rate on non-dividend income for both A and C is 21%. Corporation C earns a total of $200 million before taxes in the current year, pays corporate tax on this income and distributes the remainder proportionately to its shareholders as a dividend. In addition, Corporation A owns 40% of partnership P that earns $500 million in the current year. Given this fact pattern, answer the following questions:
a. How much cash from the Corporation C dividend remains after Corporation A pays the tax on the dividend assuming Corporation A is eligible for the 50 percent dividends received deduction?
b. If Partnership P distributes all of its current year earnings in proportion to the partner's ownership percentages, how much cash from Partnership P does Corporation A have after paying taxes on its share of income from the partnership?
c. If you were to replace Corporation A with individual A [her marginal tax rate on ordinary income is 37% and on qualified dividends is 23.8 percent (including the net investment income tax)] in the original fact pattern above, how much cash does individual A have from the Corporation C dividend after all taxes assuming the dividends are qualified dividends? Consistent with the original facts, assume that Corporation C distributes all of its after-tax income to its shareholders.](https://scanned-questions.quizplus.com/1062535.webp)
Corporation A owns 10% of Corporation C. The marginal tax rate on non-dividend income for both A and C is 21%. Corporation C earns a total of $200 million before taxes in the current year, pays corporate tax on this income and distributes the remainder proportionately to its shareholders as a dividend. In addition, Corporation A owns 40% of partnership P that earns $500 million in the current year. Given this fact pattern, answer the following questions:
a. How much cash from the Corporation C dividend remains after Corporation A pays the tax on the dividend assuming Corporation A is eligible for the 50 percent dividends received deduction?
b. If Partnership P distributes all of its current year earnings in proportion to the partner's ownership percentages, how much cash from Partnership P does Corporation A have after paying taxes on its share of income from the partnership?
c. If you were to replace Corporation A with individual A [her marginal tax rate on ordinary income is 37% and on qualified dividends is 23.8 percent (including the net investment income tax)] in the original fact pattern above, how much cash does individual A have from the Corporation C dividend after all taxes assuming the dividends are qualified dividends? Consistent with the original facts, assume that Corporation C distributes all of its after-tax income to its shareholders.
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