Maxwell Corporation reports the following results: $\begin{array}{|l|l|}
\hline \text { Gross income from operations }&\$90,000\
\hline \text { Dividends received from } 18 \% \text { owned domestic } & \
\text { corporation } & 70,000 \
\hline \text { Expenses } & 100,000 \
\hline
\end{array}$ Maxwell's dividends-received deduction is
A)$30,000.
B)$35,000.
C)$56,000.
D)$70,000.

Question

Quizplus · Accepted Answer

The dividends-received deduction for a corporation owning less than 20% of another corporation is 50% of the dividends received. Therefore, 50% of $70,000 is $35,000. However, the deduction is limited to 50% of the taxable income before the deduction, which is $90,000 - $100,000 = -$10,000. Since the taxable income is negative, the full $35,000 deduction can be taken.

Maxwell Corporation Reports the Following Results Maxwell's Dividends-Received Deduction Is A)$30,000

Maxwell Corporation Reports the Following Results Maxwell's Dividends-Received Deduction Is
A)$30,000