Jazz Corporation owns 10 percent of the Mitchell Corporation stock. Mitchell distributed a $11,800 dividend to Jazz Corporation. Jazz Corporation's taxable income (loss) before the dividend was ($6,600). What is the amount of Jazz's dividends received deduction on the dividend it received from Mitchell Corporation?

Question

Quizplus · Accepted Answer

The dividends received deduction is 70% of the dividend received. 70% x $11,800 = $8,260. However, the deduction cannot exceed the taxable income (loss) before the dividend. Since the taxable income (loss) before the dividend was ($6,600), the dividends received deduction is limited to $5,900.

Jazz Corporation Owns 10 Percent of the Mitchell Corporation Stock