In: Accounting
In 2020, Avalanche Corporation has $70,000 of net income from operations during the current year. In addition, Avalanche received $180,000 of dividend income from a corporation in which Avalanche has a 10% ownership interest. What is Avalanche’s dividends received deduction for 2020?
Question 6 options:
|
|||
|
|||
|
|||
|
|||
|
Answer:
Option c). $90,000
Calculation:
Here, we need to calculate Avalanche’s dividends received deduction for 2020.
Avalanche dividend income from a corporation = $180,000
The company receiving the dividend owns less than 20% of the company paying the dividend, the DRD amounts to 50% of the dividend received. Here the ownership is 10%
So, the Dividends Received Deduction is 50% of total dividends received by Avalanche.
Dividends Received Deduction (DRD) = 50% x 180,000 = $90,000