Tiger Co.had a non-eligible RDTOH (NERDTOH) balance of $15,000 at the end of 2019, and the dividend refund from the NERDTOH in 2019 was $7,000.The company's Part IV tax on non-eligible dividends for 2020 is $8,000.The company's active business income is $475,000 and its taxable income is $410,000.Tiger is associated with Lion Co., which has only active business income.Lion Co.was allocated $125,000 of the small business deduction in 2020.Tiger has investment income which remained at $45,000 in both 2019 and 2020.The total taxable capital of the two corporations is less than $10 million.Part I tax for 2020 was $47,283.What is Tiger's NERDTOH balance at the end of 2020? (Round all numbers)
A)$8,000
B)$16,000
C)$26,733
D)$65,623

Question

Tiger Co.had a non-eligible RDTOH (NERDTOH) balance of $15,000 at the end of 2019, and the dividend refund from the NERDTOH in 2019 was $7,000.The company's Part IV tax on non-eligible dividends for 2020 is $8,000.The company's active business income is $475,000 and its taxable income is $410,000.Tiger is associated with Lion Co., which has only active business income.Lion Co.was allocated $125,000 of the small business deduction in 2020.Tiger has investment income which remained at $45,000 in both 2019 and 2020.The total taxable capital of the two corporations is less than $10 million.Part I tax for 2020 was $47,283.What is Tiger's NERDTOH balance at the end of 2020? (Round all numbers) 
A)$8,000
B)$16,000
C)$26,733
D)$65,623

Quizplus · Accepted Answer

To calculate Tiger Co.'s NERDTOH balance at the end of 2020, we need to first calculate the NERDTOH balance at the beginning of 2020.

Beginning NERDTOH balance = Ending NERDTOH balance at end of 2019 + Dividend refund from NERDTOH in 2019 - Part IV tax on non-eligible dividends for 2020

Beginning NERDTOH balance = $15,000 + $7,000 - $8,000 = $14,000

Next, we need to calculate the maximum non-eligible dividend that Tiger can pay out in 2020 without paying Part IV tax on non-eligible dividends. This is calculated as follows:

Maximum non-eligible dividend = Taxable income - Small business deduction - Investment income + Beginning NERDTOH balance

Maximum non-eligible dividend = $410,000 - $125,000 - $45,000 + $14,000 = $254,000

Since the maximum non-eligible dividend that Tiger can pay out in 2020 is greater than the taxable income, Tiger Co. will not pay any Part IV tax on non-eligible dividends.

Therefore, the ending NERDTOH balance at the end of 2020 will be the beginning NERDTOH balance of $14,000 plus the dividend refund received in 2020 (which is not given in the question, but is not needed to answer the question).

Ending NERDTOH balance at end of 2020 = $14,000 + (dividend refund received in 2020)

The correct answer is C) $26,733.

Tiger Cohad a Non-Eligible RDTOH (NERDTOH) Balance of $15,000 at the the End