Question

Hagle Corp owns 2% of the stock in Hawk Corp. a U.S corporation. Hagle's gross income from operations for the current year is $1,000. Hagle receives $200 dividend from Hawk during the year. This figure is IN ADDITION to Hagles' $1,000 gross income from operations. Hagle has $300 of operating expenses which are fully deductible.

a.) what is the amount of Hagle's dividends received deduction? 2018 rates 50% for (less)>20% answer $100

b.) assume instead that Hagle's operating expenses are $1,050 and all other information is the same. What is Hagle's Dividend Received Deduction?

c.) Assume as a separate third alternative that the facts are as they were in part (a) except Hagle's operating expenses are $1,070. WHat is the amount of the DRD?

Answer 1

Part A		$
	Gross Income	1,000
	Less: Opeerating Expense	300
	Net Income	700
	add: Dividend Received	200
	Total Income	900
	Deduction of Dividend Received	50% of Dividend as Net Income is Positive
	Answer:	100
Part B		$
	Gross Income	1,000
	Less: Opeerating Expense	1,050
	Net Income	-50
	add: Dividend Received	200
	Total Income	150
	Deduction of Dividend Received	50% of Total Income as Net Income is Negative
	Answer:	75
Part B		$
	Gross Income	1,000
	Less: Opeerating Expense	1,070
	Net Income	-70
	add: Dividend Received	200
	Total Income	130
	Deduction of Dividend Received	50% of Total Income as Net Income is Negative
	Answer:	65