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Marathon Inc. (a C corporation) reported $1,000,000 of taxable income in the current year. During the year, it distributed $100,000 as dividends to its shareholders as follows: |
| $5,000 to Guy, a 5 percent individual shareholder. |
| $15,000 to Little Rock Corp. a 15 percent shareholder (C corporation). |
| $80,000 to other shareholders. |
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| a. |
How much of the dividend payment did Marathon deduct in determining its taxable income (Omit the “$” sign in your response.) |
| Amount deductible | $ 0 |
| b. |
Assuming Guy s marginal ordinary tax rate is 35 percent, how much tax will he pay on the $5,000 dividend he received from Marathon Inc. (Omit the “$” sign in your response.) |
| Amount deductible | $ 750 |
| c. |
Assuming Little Rock Corp. s marginal tax rate is 34 percent, what amount of tax will it pay on the $15,000 dividend it received from Marathon Inc. (70 percent dividends received deduction) (Omit the “$” sign in your response.) |
| Amount deductible | $ 1,530 |
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Form 1120 (2011) Page 2 Schedule C (a) Dividends (c) Special deductions Dividends and Special Deductions (see instructions) (b) % received (a) × (b) 1 Dividends from less-than-20%-owned domestic corporations (other than debt-financed stock) . . . . . . . . . . . . . . . . . . . . . . . . 2 Dividends from 20%-or-more-owned domestic corporations (other than debt-financed stock) . . . . . . . . . . . . . . . . . . . . . . . . 3 Dividends on debt-financed stock of domestic and foreign corporations . . . . . 4 Dividends on certain preferred stock of less-than-20%-owned public utilities . . . 5 Dividends on certain preferred stock of 20%-or-more-owned public utilities . . . . 6 Dividends from less-than-20%-owned foreign corporations and certain FSCs . . . 7 Dividends from 20%-or-more-owned foreign corporations and certain FSCs . . . 8 Dividends from wholly owned foreign subsidiaries . . . . . . . . . . . 9 Total. Add lines 1 through 8. See instructions for limitation . . . . . . . . 10 Dividends from domestic corporations received by a small business investment company operating under the Small Business Investment Act of 1958 . . . . . 11 Dividends from affiliated group members . . . . . . . . . . . . . . 12 Dividends from certain FSCs . . . . . . . . . . . . . . . . . 13 Dividends from foreign corporations not included on lines 3, 6, 7, 8, 11, or 12 . . . 14 Income from controlled foreign corporations under subpart F (attach Form(s) 5471) . 15 Foreign dividend gross-up . . . . . . . . . . . . . . . . . . 16 IC-DISC and former DISC dividends not included on lines 1, 2, or 3 . . . . . . 17 Other dividends . . . . . . . . . . . . . . . . . . . . . 18 Deduction for dividends paid on certain preferred stock of public utilities . . . . ? 19 Total dividends. Add lines 1 through 17. Enter here and on page 1, line 4 . . . ? Total special deductions. Add lines 9, 10, 11, 12, and 18. Enter here and on page 1, line 29b . . . . . . . 20 Form 1120 (2011)
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