Choice "C" is correct. Intercompany dividends are eliminated when preparing a consolidated return. The $20,000 came from income of Dow and is reported as part of consolidated income. The receipt of the dividend by Tech is not included again.
Choice "d" is incorrect. As the two corporations file a consolidated return, 100% of the dividends are eliminated, not taxable.
Choice "a" is incorrect. This answer is 70% of the $20,000 dividend. 100% of the dividend is eliminated when a consolidated return is filed.
Choice "b" is incorrect. This answer is 30% of the $20,000 dividend. 100% is eliminated upon consolidation. This answer assumes Tech is entitled to a 70% dividends received deduction.