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Problem 15-53 (LO 15-3) (Static) Marathon Inc. (a C corporation) reported $1,000,000 of taxable income...

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Accounting

Problem 15-53 (LO 15-3) (Static)

Marathon Inc. (a C corporation) reported $1,000,000 of taxable income in the current year. During the year, it distributed $100,000 as dividends to its shareholders as follows:

  • $5,000 to Guy, a 5 percent individual shareholder.
  • $15,000 to Little Rock Corp., a 15 percent shareholder (C corporation).
  • $80,000 to other shareholders.

Problem 15-53 Parts a,b, and c (Static)

  1. How much of the dividend payment did Marathon deduct in determining its taxable income? $0

  1. Assuming Guys marginal ordinary tax rate is 37 percent, how much tax will he pay on the $5,000 dividend he received from Marathon Inc. (including the net investment income tax)? 5000 * 23.8% = 1190

3. What amount of tax will Little Rock Corp. pay on the $15,000 dividend it received from Marathon Inc. (50 percent dividends received deduction)? 15000 * .50 = 7500 * 21% = 1575

Problem 15-53 Part e (Static)

  1. e-1. On what line on page 1 of Little Rock Corp.s Form 1120 is the dividend from Marathon Inc. reported?
  2. e-2. On what line on page 1 of Little Rock Corp.s Form 1120 is its dividends received deduction reported? (Assume 2020 form is same structure as 2019 form.)

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