On January 1,20X8,Putter Corporation Acquired 40 Percent of the Voting

question 9

Multiple Choice

On January 1,20X8,Putter Corporation acquired 40 percent of the voting shares of Shank Company for $65,000.Shank reported net income of $45,000 and paid dividends of $10,000 in 20X8.Putter reported operating income of $50,000 for the year.There is 80 percent exemption of intercompany dividends and the effective tax rate is 35 percent.Assume that the equity method is being used.
-For a subsidiary to be eligible to be included in a consolidated tax return,at least ________ of its stock must be held by the parent company or another company included in the consolidated return.

• A)50 percent
• B)40 percent
• C)75 percent
• D)80 percent

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