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    Effective Tax Rate on Intercompany Dividends

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    A parent holding company sells shares in its subsidiary such that the parent now owns only 65 percent of the subsidiary and thus, the tax returns of the parent and its subsidiary can't be consolidated. The parent receives annual dividends from the subsidiary of $2,500,000. If the parent's marginal tax rate is 34 percent and if the exclusion on intercompany dividends is 70 percent, what is the effective tax rate on the intercompany dividends and what are the net dividends received?

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    If the exclusion on intercompany dividends is 70 percent, then only 30 percent of the dividends received by a parent company be ...

    Solution Summary

    This solution is comprised of a detailed explanation to answer what is the effective tax rate on the intercompany dividends and what are the net dividends received.

    $2.19

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