Determine the amount of the dividends received deduction in each of the following instances. In all...

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.

Dividend of $10,000 from a 45% owned corporation; taxable income before DRD of $50,000.
Dividend of $19,000 from a 15% owned corporation; taxable income before DRD of $75,000.
Dividend of $22,000 from a 60% owned corporation; taxable income before DRD of $11,000.
Dividend of $8,000 from a 10% owned corporation; taxable income before DRD of $7,000.

Solutions

Expert Solution

Answer:a. No limitation. The DRD is $10,000 x 80% = $8,000.

b. No limitation. The DRD is $19,000 x 70% = $13,300

c. The DRD is not limited. This is an 80% DRD entity. Thus, if income before DRD is between $22,000 (100% of the dividend) and $17,600 (80% of the dividend), the DRD will be limited. Such is not the case. Thus, the DRD is $22,000 x 80% = $17,600.

d. The DRD is limited. This is a 70% entity. If income before DRD is between $8,000 (100% of the dividend) and $5,600 (70% of the dividend), the DRD will be limited. Because income is between those endpoints, the DRD is limited to 70% of income, or $4,900.

ekkarill92 answered 1 year ago

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