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Course: Taxation of C Corporations Problems:

Calculation of Corporate Tax: Show your calculations, reference all relevant citations, and explain your answer. Use a flat tax rate of 21% for all problems. Assume there is no Alternative Minimum Tax for these problems. Assume that all entities are U.S. domestic corporations taxed under Subchapter C of the IRC unless otherwise noted.

Problem 1.2Dividends Received Deduction and Qualified Dividends Ace Corporation owns stock in Joker Corporation (and has owned it for four years).

During 20x8, Ace Corporation received $1 million in dividend distributions from Joker Corporation.

a) If Ace owns 9% (by vote and value) of Joker Corporation, how much taxable income will it recognize as a result of the $1 million dividend distribution? b) If Ace owns 20% (by vote and value) of Joker Corporation, how much taxable income will it recognize as a result of the $1 million dividend distribution?

c) If Ace owns 86% (by vote and value) of Joker Corporation, how much taxable income will it recognize as a result of the $1 million dividend distribution? d) If Ace Corporation had $2 million in other taxable income for the 2016 tax year, calculate its taxable income under scenarios A, B, and C.

e) If the stock in Joker Corporation was owned instead by Jack (a U.S. individual, filing single), whos Adjusted Gross Income for 20x8 (excluding the dividends) was $1,000,000, how much Would his taxable income increase as a result of the dividend, and how much tax would he pay on the dividend?

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