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Gilley Corporation, a calendar year taxpayer, receives dividend income of $510,000 from a corporation in...

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Accounting

Gilley Corporation, a calendar year taxpayer, receives dividend income of $510,000 from a corporation in which it holds a 60% interest. Gilley also receives interest income of $70,000 from municipal bonds. (The municipality used the proceeds from the bond issue to construct new sewer lines.) Gilley borrowed funds to purchase the municipal bonds and pays $30,000 of interest on the loan. Excluding these items, Gilley's taxable income is $490,000. Gilley has $240,000 of accumulated E & P at the end of the prior year and it paid Federal income taxes of $105,000 during the year.

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a. After these items are taken into account, Gilley Corporation's taxable income is $____________

b. If its beginning balance this year in accumulated E & P is $240,000, then Gilley Corporation's accumulated E & P at the start of next year is $_____________

EXHIBIT 3.2 Dividends Received Deduction Percentage of Ownership by Corporate Shareholder Less than 20% 20% or more (but less than 80%) 80% or more" The payor corporation must be a member of an affiliated group with the recipient corporation. Deduction Percentage 50% 65% 100%

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