Jazz Corporation owns 10 percent of the Williams Corp. stock. Williams distributed a $10,000 dividend to Jazz Corporation. Jazz Corp.'s taxable income (loss) before the dividend was ($2,000). What is the amount of Jazz's dividends received deduction on the dividend it received from Williams Corp.?

Question

Quizplus · Accepted Answer

The dividends received deduction is 70% of the dividend received, which is $10,000 x 70% = $7,000. However, since Jazz Corporation's taxable income before the dividend was ($2,000), the dividends received deduction is limited to $2,000.

Jazz Corporation Owns 10 Percent of the Williams Corp