ABC Company owns 40 percent of JMT Company and 95 percent of DEM Company.JMT pays a $100,000 dividend to ABC and DEM pays a $40,000 dividend to ABC in 2013.Assuming that ABC has
$1,000,000 of taxable income,calculate ABC's dividends received deduction for 2013.

Question

Quizplus · Accepted Answer

ABC's dividends received deduction is $120,000. This is calculated as follows:Dividend from JMT: $100,000 x 40% = $40,000Dividend from DEM: $40,000 x 95% = $38,000Total dividends received: $40,000 + $38,000 = $78,000Dividends received deduction: $78,000 x 80% = $120,000

ABC Company Owns 40 Percent of JMT Company and 95