n each of the following independent situations, determine the dividends received deduction for the calendar year...

n each of the following independent situations, determine the dividends received deduction for the calendar year C corporation.

Assume that Seafoam Corporation owns 40%, Oceanview owns 25% and Roughwaters owns 5% of the stock in the corporations paying the dividends.

	Seafoam Corporation	Oceanview Corporation	Roughwaters Corporation
Income from operations	$240,000	$480,000	$700,000
Expenses from operations	(265,000)	(485,000)	(680,000)
Qualifying dividends	100,000	100,000	100,000

Click here to view the dividend received deduction ownership percentages and corresponding deduction percentage.

a.	The dividends received deduction for Seafoam Corporation is	$.
b.	The dividends received deduction for Oceanview Corporation is	$.
c.	The dividends received deduction for Roughwaters Corporation is	$.

Solutions

Expert Solution

	Seafoam Corporation	Oceanview Corporation	Rough waters Corporation
Income from operations	$240,000.00	$480,000.00	$700,000.00
Expenses from operations	-$265,000.00	-$485,000.00	-$680,000.00
Net Income from operations	-$25,000.00	-$5,000.00	$20,000.00
Qualifying dividends	$100,000.00	$100,000.00	$100,000.00
Income before the DRD (tentative income)	$75,000.00	$95,000.00	$120,000.00
Dividends received deduction (70% × $100,000 dividends)	-$70,000.00	-$70,000.00	-$70,000.00
Taxable income	$5,000.00	$25,000.00	$50,000.00
The DRD is the lesser of: (1) 80% × $100,000 (dividends) = $80,000; or (2) 80% × $75,000 (tentative income) = $60000	$60,000.00
The DRD is the lesser of: (1) 80% × $100,000 (dividends) = $80,000; or (2) 80% × $95,000 (tentative income) = $76000.		$76,000.00
The DRD is the lesser of: (1) 70% × $100,000 (dividends) = $70,000; or (2) 70% × $120,000 (tentative income) = $84000			$70,000.00
The dividends received deduction for Seafoam Corporation is	$60,000.00
The dividends received deduction for Oceanview Corporation is	$76,000.00
The dividends received deduction for Roughwaters Corporation is	$70,000.00

Company owns more than 20% but less than 80 % of the company paying the dividend, the DRD amounts to 80% of the dividend received.
Company owns less than 20% of the company paying the dividend, the DRD amounts to 70% of the dividend received.
Company owns more than 80% t of the company paying the dividend, the DRD amounts to 100% of the dividend received.

ekkarill92 answered 1 year ago

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