Answer:
a. Taxable Income = $42,000
b. Taxable Income = $28,000
Explanation:
Given
Income from operations $660,000
Expenses from operations $760,000
Dividends received from Brown Corporation $240,000
a.
Taxable Income is calculated
Dividend received + Income from operations - Expenses from Operations
Taxable Income = $240,000 + $660,000 - $760,000
Taxable Income = $140,000
Swallow Corp owns 12% of Browns Corporation stock;
And 12% is not up to 20% owned by Browns Corporation.
So. The Dividend Received is 70% of $140,000
Dividend = $98,000
Taxable Income = $140,000 - $98,000
Taxable Income = $42,000
b.
Dividend Received + Taxable Income (ii) = Taxable Income (i)
Where Taxable Income (I) = $140,000
Calculating Dividend
Dividend = 80% of $140,000
Dividend = $112,000
Taxable Income = $140,000 - $112,000
Taxable Income = $28,000
.
