Corporation a Owns 10% of Corporation C

Essay

Corporation A owns 10% of Corporation C.The marginal tax rate on non-dividend income for both A and C is 34%.Corporation C earns a total of $200 million before taxes in the current year,pays corporate tax on this income and distributes the remainder proportionately to its shareholders as a dividend.In addition,Corporation A owns 20% of partnership P that earns $500 million in the current year.Given this fact pattern,answer the following questions:
a.How much cash from the Corporation C dividend remains after Corporation A pays the tax on the dividend assuming Corporation A is eligible for the 70 percent dividends received deduction?
b.If partnership P distributes all of its current year earnings in proportion to the partner's ownership percentages,how much cash from Partnership P does Corporation A have after paying taxes on its share of income from the partnership?
c.If you were to replace corporation A with individual A [her marginal tax rate on ordinary income is 28% and on qualified dividends is 15% (the net investment income tax does not apply)] in the original fact pattern above,how much cash does individual A have from the Corporation C dividend after all taxes assuming the dividends are qualified dividends? Consistent with the original facts,assume that Corporation C distributes all of its after-tax income to its shareholders.