Jumper Inc., which has a 34 percent marginal tax rate, owns 40 percent of the stock of

Question:

Jumper Inc., which has a 34 percent marginal tax rate, owns 40 percent of the stock of a CFC. At the beginning of 2015, Jumper’s basis in its stock was $660,000. The CFC’s 2015 income was $1 million, $800,000 of which was subpart F income. The CFC paid no foreign income tax and distributed no dividends.
a. Compute Jumper’s 2015 constructive dividend and related tax cost as a result of its investment in the CFC.
b. Compute Jumper’s basis in its CFC stock at the beginning of 2016.

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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