12 points: 4 points each
) Identify the
amount of tax that will be due from the
on the dividends received
in each of the scenarios below.
Masha (an individual taxpayer) owns 100 percent of Metro Fashion Corporation. In 2017,
she receives a $100,000 dividend from the Corporation. Masha’s other sources of income
this year are wages of $80,000 (thus, she is not considered a high income taxpayer).
Tyson Corporation owns 100 percent of Lafayette Corporation, and both companies are
in the same affiliated group. Lafayette pays Tyson $300,000 in dividends in 2017. Aside
from the dividend income, Tyson Corporation earned $400,000 in income from its
ordinary operations during the year.
Maya Enterprises (a corporate taxpayer) owns 15 percent of Tiger Corporation. Maya
Enterprises earned $2 million from its ordinary operations during 2017. Tiger
Corporation paid out a total of $1 million in dividends to all its owners, giving each
owner a dividend in proportion to its ownership percentage.
Hint: We had to determine additional taxes due in the beginning of the class where we determined
whether Bron should take the additional fight. This may help you remember how to estimate the
amount of tax due as opposed to the total tax due in a situation.