All of the stock of Hot Dog, Inc., a fast food franchise operating in 9 southeastern states, is owned by Welcome America, Inc., a § 501(c)(3) organization. The stock was received last year as an inheritance from Rob, the entrepreneur who founded the chain.
During the current year, Hot Dog reports profits before taxes and taxable income of $8 million. Hot Dog distributes $5 million to its parent, and it retains the balance for expansion purposes.
a. What are the tax consequences to Hot Dog and to Welcome America?
b. How would your answer in a. change if Hot Dog distributes $8 million to Welcome America, rather than $5 million?

Question

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The Answer of All of the stock of Hot Dog, Inc., a fast food franchise operating in 9 southeastern states, is owned by Welcome America, Inc., a § 501(c)(3) organization. The stock was received last year as an inheritance from Rob, the entrepreneur who founded the chain.
During the current year, Hot Dog reports profits before taxes and taxable income of $8 million. Hot Dog distributes $5 million to its parent, and it retains the balance for expansion purposes.
a. What are the tax consequences to Hot Dog and to Welcome America?
b. How would your answer in a. change if Hot Dog distributes $8 million to Welcome America, rather than $5 million?

All of the Stock of Hot Dog, Inc