Earwood Corporation, a calendar year taxpayer, receives dividend income of $140,000 from a corporation in which it holds a 35% interest. Earwood also receives interest income of $15,000 from municipal bonds. (The municipality used the proceeds from the bond issue to construct a park.) Earwood borrowed funds to purchase the municipal bonds and pays $12,000 of interest on the loan. Excluding these items, Earwood's taxable income is $320,000. Earwood has $90,000 of accumulated E & P at the end of the prior year and it paid Federal income taxes of $98,250 during the year.

a) After these items are taken into account, Earwood Corporation's taxable income is $?

b) If its beginning balance this year in accumulated E & P is $90,000, then Earwood Corporation's accumulated E & P at the start of next year is $?
 

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EXHIBIT 3.2 Dividends Received Deduction Percentage of Ownership by Corporate Shareholder Deduction Percentage Less than 20% 50% 20% or more (but less than 80%) 65% 80% or more 100% *The payor corporation must be a member of an affiliated group with the recipient corporation. EXHIBIT 3.2 Dividends Received Deduction Percentage of Ownership by Corporate Shareholder Deduction Percentage Less than 20% 50% 20% or more (but less than 80%) 65% 80% or more 100% *The payor corporation must be a member of an affiliated group with the recipient corporation.

Answer rating: 100% (QA)

a Earwoods taxable income after all adjustments are 369000 Earwoods taxable income before adjustment... View the full answer