Palmquist Corporation and its 80%-owned subsidiary, Sadler Corporation, are members of an affiliated group. They do not file consolidated tax returns. Sadler had $3,000,000 of income and paid $1,000,000 dividends in 2014. Palmquist and Sadler had 35% income tax rates. What amount of Sadler’s dividends is taxable to Palmquist in 2014?
A. $0
B. $ 70,000
C. $160,000
D. $200,000
Answer:A
Palmquist Corporation and its 80%-owned subsidiary, Sadler Corporation, are members of an affiliated group. They do not file consolidated tax returns. Sadler had $3,000,000 of income and paid $1,000,000 dividends in 2014. Palmquist and Sadler had 35% income tax rates. What amount of Sadler’s dividends is taxable to Palmquist in 2014?
A. $0 B. $ 70,000 C. $160,000 D. $200,000