John Budd is the sole stockholder of Ral Corp., an accrual basis taxpayer engaged in wholesaling operations. Ral's retained earningsat January 1, Year 1, amounted to $1,000,000. For the year ended December 31, Year 1, Ral's book income, before federal incometax, was $300,000. Included in the computation of this $300,000 were the following:$1,000 Dividends received on 500 shares of stock of a taxable domestic corporation that had 1,000,000 shares of stockoutstanding (Ral had no portfolio indebtedness).What amount of the net dividend revenue should be included in Ral's Year 1 taxable income after special deductions?$500$200$150O $900

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What amount of the net dividend revenue should be included in Ral's Year 1 taxable income after special deductions?

SWFT Comprehensive Vol 2020

43rd Edition

ISBN:9780357391723

Author:Maloney

Publisher:Maloney

Chapter17: Corporations: Introduction And Operating Rules

Section: Chapter Questions

Problem 4BCRQ

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Concept explainers

Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.

Question

John Budd is the sole stockholder of Ral Corp., an accrual basis taxpayer engaged in wholesaling operations. Ral's retained earnings
at January 1, Year 1, amounted to $1,000,000. For the year ended December 31, Year 1, Ral's book income, before federal income
tax, was $300,000. Included in the computation of this $300,000 were the following:
$1,000 Dividends received on 500 shares of stock of a taxable domestic corporation that had 1,000,000 shares of stock
outstanding (Ral had no portfolio indebtedness).
What amount of the net dividend revenue should be included in Ral's Year 1 taxable income after special deductions?
$500
$200
$150
O $900

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