Problem 19-33 Cardinal Corporation, a calendar year taxpayer, receives dividend income of $250,000 from a...
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Accounting
Problem 19-33
Cardinal Corporation, a calendar year taxpayer, receives dividend income of $250,000 from a corporation in which it holds a 10% interest. Cardinal also receives interest income of $35,000 from municipal bonds. (The municipality used the proceeds from the bond issue to construct a library.) Cardinal borrowed funds to purchase the municipal bonds and pays $20,000 of interest on the loan. Excluding these three items, Cardinal's taxable income is $500,000. Cardinal has $150,000 of accumulated E & P at the end of the prior year, and it paid Federal income taxes of $131,250 during the year.
See bottom for the Dividend Received Deduction Table.
a. After these three items are taken into account, Cardinal Corporation's taxable income is $ 625,000. (Correct)
b. Cardinal Corporation's accumulated E & P at the start of next year is $_________. ??
Given: Dividends Received Deduction
Percentage of Ownership by Corporate Shareholder Deduction Percentage
Less than 20% 50%
20% or more (but less than 80%) 65%
80% or more* 100%
*The payor corporation must be a member of an affiliated group with the recipient corporation.
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