How to compute taxable income


Dividends Received Deduction

Response to the following problem:

Treeline Industries receives a $50,000 dividend from a corporation in which it owns 35% of the stock. Treeline's revenues (not including the dividends) and operating expenses for the year are $400,000 and $375,000, respectively. Other than the dividends received deduction, these are the only items of revenue and expense.

a. Compute Treeline's taxable income.

b. How, if at all, would your answer to Part a. change if Treeline owned 10% of the stock in the corporation?

c. How, if at all, would your answer to Part a. change if Treeline's revenues were $370,000 (instead of $400,000), but it continued to own 35% of the corporation's stock?

 

 

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Taxation: How to compute taxable income
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