Riverbend Inc. received a $200,000 dividend from stock it held in Hobble Corporation. Riverbends taxable income is

Question:

Riverbend Inc. received a $200,000 dividend from stock it held in Hobble Corporation. Riverbend’s taxable income is $2,100,000 before deducting the dividends received deduction (DRD), a $100,000 charitable contribution.
a. What is Riverbend’s deductible DRD assuming it owns 10 percent of Hobble Corporation?

b. Assuming the facts in part (a), what is Riverbend’s tax rate on the dividend, taking into account the DRD?

c. What is Riverbend’s DRD assuming it owns 60 percent of Hobble Corporation?
d. Assuming the facts in part (c), what is Riverbend’s tax rate on the dividend, taking into account the DRD?
e. What is Riverbend’s DRD assuming it owns 85 percent of Hobble Corporation (and is part of the same affiliated group)?
f. Assuming the facts in part (e), what is Riverbend’s tax rate on the dividend, taking into account the DRD?

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...

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