Question

wk 5 assing 1

Determine the amount of the dividends received deduction in each of the following instances. In all cases, the net income figure includes the full dividend. Use Dividends deduction table.

1. Dividend of $11,500 from a 45% owned corporation; taxable income before DRD of $54,500.
2. Dividend of $19,900 from a 15% owned corporation; taxable income before DRD of $78,000.
3. Dividend of $13,000 from a 60% owned corporation; taxable income before DRD of $7,000.
4. Dividend of $3,500 from a 10% owned corporation; taxable income before DRD of $2,760.

	a. Dividend received deduction b. Dividend received deduction c. Dividend received deduction d. Dividend received deduction

Answer 1

DRD

Dividend received deduction- DRD% is applied on lesser of Dividend Income Or T\axable Income

Generally DRD% applies to amount of dividend income

-- Less than 20% Ownership(small investment)= 50% DRD per TCJA

--20% - or More ownership (large investment) = 65% DRD per TCJA

--80% or More ownership = consolidated tax returns

Exception cases-- If applying DRD% on the dividend income creates NOL; in this DRD is again calculated on the dividend icome.

Income before DRD	$           54,000	$           78,000	$                7,000	$             2,760
DRD%	65%	50%	65%	50%
DRd	$              7,475	$              9,950	$                8,450	$             1,380
Taxable Income	$           46,525	$           68,050	$              (1,450)	$             1,380