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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28084
Experience:  Taxes, Immigration, Labor Relations
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Lets say LLC A owns C-Corp B. When B pays dividends to A,

Customer Question

Let's say LLC A owns C-Corp B.
When B pays dividends to A, is it considered A's investment income rather than operating income? Is it part of revenue then?

Many cities collect business tax base on total revenue. I wonder if the dividends is subject to business tax for A.
Submitted: 3 years ago.
Category: Tax
Expert:  Lev replied 3 years ago.

Lev :

Hi and welcome to Just Answer!
You are correct - in general - dividends are considered investment income and not business income (that you referred as "operating income").
Yes - investment income - is a part of revenue but it is accounted separately.
You also account separately for income from rental activities, passive income/loss, capital gain/loss, etc.
If local taxes are based on gross revenue - that is generally included investment income - such as dividends, capital gains, etc. However to be specific - that should be verified with local taxing authorities.

Expert:  Lev replied 3 years ago.

Just in case you were not able to use the chat - I am switching to Q&A mode and porting the answer below.
Please feel free to communicate if you need any clarification or have other tax related issues.

 

Hi and welcome to Just Answer!
You are correct - in general - dividends are considered investment income and not business income (that you referred as "operating income").
Yes - investment income - is a part of revenue but it is accounted separately.
You also account separately for income from rental activities, passive income/loss, capital gain/loss, etc.
If local taxes are based on gross revenue - that is generally included investment income - such as dividends, capital gains, etc. However to be specific - that should be verified with local taxing authorities.


Please let me know if you want to elaborate.