Suppose that in addition to the $5.5 million of taxable income from operations, Emily's Flowers, Inc. received $500,000 of interest on state-issued bonds and $300,000 of dividends on common stock it owns in Amy's Iris Bulbs, Inc. Using the tax schedule in
A)$1,900,600, 34%, 34%, respectively
B)$1,972,000, 34%, 34%, respectively
C)$2,070,600, 34%, 34%, respectively
D)$2,142,000, 34%, 34%, respectively

Question

Quizplus · Accepted Answer

The taxable income from operations is $5.5 million. Interest on state-issued bonds is typically tax-exempt, so the $500,000 is not included in taxable income. Dividends received from another corporation may qualify for a dividends-received deduction, but the exact amount depends on ownership percentage. Assuming a 70% deduction, the taxable portion of the $300,000 dividends is $90,000. Therefore, the total taxable income is $5.5 million + $90,000 = $5,590,000. Applying a 34% tax rate gives a tax of $1,900,600.

Suppose That in Addition to the $5