Corporation A owns 15 percent of the stock of corporation B. Corporation B pays corporation A $100,000 in dividends in 2002. Corporation A must pay tax on ________.

Question

Quizplus · Accepted Answer

When a corporation receives dividends from another corporation in which it owns less than 20 percent of the stock, only 70 percent of the dividends are taxable as ordinary income. Therefore, corporation A must pay tax on 70 percent of $100,000, which is $70,000.

Corporation a Owns 15 Percent of the Stock of Corporation