In: Accounting
A corporation's taxable income before the dividends received deduction (DRD) is $80,000. Included in the $80,000 is $90,000 for dividend income the corporation received from another corporation in which it owns 60% of the common stock. The corporation's DRD is:
A. | $52,000 | |
B. | $54,000 | |
C. | $58,500 | |
D. | $48,000 |
As corporation owes 60% in the corporation from which dividend is received, therefore dividend received deduction = 65% of dividend received = $90,000 *65% = $58,500
However deduction is limited to 65% of taxable income only, therefore DRD = $80,000 * 65% = $52,000
Hence option A is correct.