In the current year,Parvifolia,Inc.had $400,000 of revenue from operations and $160,000 of dividends from non-affiliated 15 percent-owned domestic corporations.The corporation's deductible operating expenses totaled $410,000.What is Parvifolia,Inc.'s dividends received deduction for the current year?

Question

Quizplus · Accepted Answer

The dividends received deduction (DRD) for a corporation owning less than 20% of another corporation is 50% of the dividends received. Therefore, the DRD is 50% of $160,000, which equals $80,000. However, since the corporation has a net operating loss ($400,000 revenue - $410,000 expenses = -$10,000), the DRD is limited to 50% of the taxable income before the DRD, which is $210,000 ($400,000 + $160,000 - $410,000). Therefore, the DRD is 50% of $210,000, which equals $105,000.

In the Current Year,Parvifolia,Inc