A Parent Holding Company Sells Shares in Its Subsidiary Such

Multiple Choice

A parent holding company sells shares in its subsidiary such that the parent now owns only 65% of the subsidiary and,thus,the tax returns of the parent and its subsidiary can't be consolidated.The parent receives annual dividends from the subsidiary of $2,500,000.If the parent's marginal tax rate is 34% and if the exclusion on intercompany dividends is 70%,what is the effective tax rate on the intercompany dividends,and how much net dividends are received?

A) 10.2%;$2,245,000
B) 10.2%;$2,135,000
C) 23.8%;$1,905,000
D) 10.2%;$1,750,000
E) 34.0%;$1,650,000