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31 August, 21:50

Before the provision for Federal income tax, Karas Corporation had book income of $400,000 for the current year. The book income included $100,000 of dividends received from a 15% owned domestic corporation. What was Karas Corporation's taxable income for the current year? a. $300,000b. $335,000c. $350,000d. $400,000

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  1. 31 August, 21:52
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    correct option is c. $350,000

    Explanation:

    given data

    book income = $400,000

    dividends = $100,000

    owned domestic corporation = 15%

    to find out

    Karas Corporation's taxable income for the current year

    solution

    we know here that Karas Corporation qualifies report that dividends received deduction = 50 % of dividends from the taxable unaffiliated domestic corporation

    so we here assumed that if paying corporation is unaffiliated

    then receiving corporation owns less than = 20 %

    so book net income before federal income tax = $400,000

    and Dividends received deduction = 0.50 * $100,000 = $50,000

    Taxable income will be = book net income before federal income tax - Dividends received deduction ... 1

    put here value

    Taxable income = $400,000 - $50000

    Taxable income = $350,000

    so correct option is c. $350,000
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