OmCo Acquired NegCo This Year for $1 Million

question 63

Multiple Choice

OmCo acquired NegCo this year for $1 million.Two of the tax attributes that OmCo found appealing are NegCo's NOL of $500,000 and its negative E&P of $300,000.Before applying any of NegCo's tax benefits,OmCo has taxable income of $525,000 and E&P of $350,000.OmCo pays a dividend of $100,000 to its shareholders.How much of this dividend is taxable?

• A)$25,000 is taxable.
• B)$50,000 is taxable.
• C)$75,000 is taxable.
• D)$100,000 is taxable.
• E)None of the above.

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Definitions:

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Sexually transmitted disease caused by the bacterium Neisseria gonorrhoeae.

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Medications taken orally to prevent pregnancy by inhibiting ovulation, thickening cervical mucus, or altering the uterine lining.

Prostate Gland

Gland in male humans that secretes an alkaline, cloudy fluid that increases the motility of sperm.