Tax Base Question

Johnson, Inc. recognized and received $2 million in dividends from a subsidiary. Dividends are taxable when received. Which of the following is correct?

a. The carrying amount is $0 and the tax base is $0

b. The carrying amount is $0 and the tax base is $2,000,000

c. The carrying amount is $2,000,000 and the tax base is $0

d. The carrying amount is $2,000,000 and the tax base is $2,000,000

I’m really struggling with this question. First of all, this is dividends RECEIVED and not dividends RECEIVABLE. Does this mean that there is no tax base as dividends received are not reported on the balance sheet?

Second, I know in the curriculum dividends receivable from a subsidiary are not taxable. However, in the question it states the dividends are taxable when received. These types of questions with dividends receivable from a subsidiary normally point to the tax base and carrying value being the same.

Any help is appreciated!

Thank you!