Gains Inc. had a balance in its capital dividend account of $150,000 at January 1, 2020. During the 2020 year, the company had a taxable capital gain of $50,000, allowable capital losses of $30,000, received a capital dividend of $35,000 from a subsidiary, and paid eligible dividends of $45,000. On November 15, 2020, a capital dividend of $32,000 was paid, and the appropriate election was filed. What is the balance in the capital dividend account at December 31, 2020?

Question

Quizplus · Accepted Answer

Starting balance in Capital Dividend Account (CDA) = $150,000
Taxable Capital Gain = $50,000
Allowable Capital Losses = $30,000
Capital dividend received from subsidiary = $35,000
Eligible dividends paid = $45,000
Therefore, the amount available for capital dividends at the end of 2020 = $150,000 + $50,000 - $30,000 + $35,000 - $45,000= $160,000
On November 15, 2020, a capital dividend of $32,000 was paid, and the appropriate election was filed. So, the balance in the CDA on December 31, 2020, will be:
$160,000 - $32,000 = $128,000
Therefore, the balance in the CDA at December 31, 2020, is $173,000, and the best choice is (C).

Gains Inc Had a Balance in Its Capital Dividend Account of of $150,000