Valmont owns 98% of the stock of Barnes Corporation, a manufacturer. During the current year, Barnes has operating income of $64,000, interest income of $10,000 from investments, and passive losses from investments in limited partnerships of $20,000. Barnes Corporation pays $12,000 in dividends. What is Barnes' taxable income for the current year?
A)$34,000
B)$48,600
C)$54,000
D)$62,000
E)$74,000

Question

Quizplus · Accepted Answer

As Valmont owns 98% of Barnes Corporation's stock, Barnes is a subsidiary of Valmont and the income of Barnes is consolidated with the income of Valmont for tax purposes.

Operating income of Barnes Corporation: $64,000

Interest income of Barnes Corporation: $10,000

Passive losses from investments in limited partnerships: ($20,000)

Taxable income of Barnes Corporation: $64,000 + $10,000 - $20,000 - $12,000 = $54,000.

Therefore, the correct option is (C).

Valmont Owns 98% of the Stock of Barnes Corporation, a Manufacturer