Westside,Inc.owns 15% of Innsbrook's common stock.This year,Westside generated $50,000 operating income and received $20,000 dividends from Innsbrook.Westside's taxable income is:

Question

Quizplus · Accepted Answer

Westside's taxable income includes its operating income of $50,000 plus the dividends received from Innsbrook. Since Westside owns less than 20% of Innsbrook, it can exclude 50% of the dividends received from taxation. Therefore, $20,000 x 50% = $10,000 is excluded, and $10,000 is taxable. Thus, taxable income is $50,000 + $10,000 = $56,000.