Red Corporation,which Owns Stock in Blue Corporation,had Net Operating Income

question 72

Multiple Choice

Red Corporation,which owns stock in Blue Corporation,had net operating income of $200,000 for the year.Blue pays Red a dividend of $40,000.Red takes a dividends received deduction of $28,000.Which of the following statements is correct?

• A)Red owns less than 20% of Blue Corporation.
• B)Red owns 20% or more,but less than 80% of Blue Corporation.
• C)Red owns 80% of Blue Corporation.
• D)Red owns 80% or more of Blue Corporation.
• E)None of the above.

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Definitions:

Deficit Financing

The practice of funding government spending by borrowing rather than from taxation, leading to a budget deficit.

Tax Rates

The percentages at which income, property, and sales are taxed by governments, varying for different levels of income or value.

Market For Loanable Funds

The market in which those who want to save supply funds and those who want to borrow to invest demand funds.

Nominal Interest Rate

The rate of interest charged on a loan or paid on an investment without adjustment for inflation.