Marabel Corporation has three shareholders who together own more than 50% of the stock throughout the year. More than 60% of Marabel's adjusted gross income is from dividends and interest income. Marabel has $300,000 of taxable income this year after taking a $40,000 dividends-received deduction. Marabel paid $50,000 of dividends to shareholders earlier in the year. a. What is Marabel's personal holding company tax?b. Assume the tax year is not quite over, and you are doing year-end projections for the board. How much in additional dividends should Marabel pay to shareholders in order to avoid the personal holding company tax?
What will be an ideal response?
| a. Taxable income | $300,000 |
| Plus: | Dividends-received deduction | 40,000 |
| Minus: | Federal income tax liability | ( 63,000) |
| Dividends-paid deduction | ( 50,000) |
| Undistributed personal holding company income | $ 227,000 |
| Times: Personal holding company tax rate | × 0.20 |
| Personal holding company tax | $ 45,400 |
Business
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