AB Inc Received a Dividend from CD Corporation and Is Able

question 32

Short Answer

AB Inc. received a dividend from CD Corporation and is able to claim the dividends received deduction without limitation. AB owns 10 percent of CD. What is AB's marginal tax rate (to the nearest tenth of a percent) on the dividends received (after taking the DRD into account) assuming its ordinary marginal tax rate is 34%?

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Definitions:

Subsidiary Company

A company that is entirely or majority-owned by another company, referred to as the parent company.

Controlling Interest

Ownership of more than 50% of the common stock of another entity.

Short-Term Debt Investments

Investments made with the expectation of earning a return within a short period, typically less than one year, often in bond or money markets.

Long-Term Debt Investments

Investments in bonds or other debt instruments with maturities beyond one year.