Coop Inc. owns 40 percent of Chicken Inc. Both Coop and Chicken are corporations. Chicken pays Coop a dividend of $10,000 in the current year. Chicken also reports financial accounting earnings of $20,000 for that year. Assume Coop follows the general rule of accounting for investment in Chicken. What is the amount and nature of the book-tax difference to Coop associated with the dividend distribution (ignoring the dividends received deduction)?
A. $2,000 unfavorable.
B. $10,000 favorable.
C. $2,000 favorable.
D. $10,000 unfavorable.
E. None of the choices are correct.
Answer: A
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