Corporation a Owns 10% of Corporation C

question 4

Essay

Corporation A owns 10% of Corporation C.The marginal tax rate on non-dividend income for both A and C is 34%.Corporation C earns a total of $200 million before taxes in the current year,pays corporate tax on this income and distributes the remainder proportionately to its shareholders as a dividend.In addition,Corporation A owns 20% of partnership P that earns $500 million in the current year.Given this fact pattern,answer the following questions:
a.How much cash from the Corporation C dividend remains after Corporation A pays the tax on the dividend assuming Corporation A is eligible for the 70 percent dividends received deduction?
b.If partnership P distributes all of its current year earnings in proportion to the partner's ownership percentages,how much cash from Partnership P does Corporation A have after paying taxes on its share of income from the partnership?
c.If you were to replace corporation A with individual A [her marginal tax rate on ordinary income is 28% and on qualified dividends is 15% (the net investment income tax does not apply)] in the original fact pattern above,how much cash does individual A have from the Corporation C dividend after all taxes assuming the dividends are qualified dividends? Consistent with the original facts,assume that Corporation C distributes all of its after-tax income to its shareholders.

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Definitions:

Hobbes

Referring to Thomas Hobbes, a 17th-century English philosopher known for his work on political philosophy, particularly his book "Leviathan," where he discusses the structure of society and legitimate government.

Compassion

A feeling of deep sympathy and sorrow for another who is stricken by misfortune, accompanied by a strong desire to alleviate the suffering.

Humankind

The human race considered collectively, emphasizing the shared qualities and experiences of all humans.

Sociological Perspective

An approach to understanding human behavior by placing it within its broader social context.