Donatoni Corporation owns 40% of Market, Inc. voting common stock. During the current year, Donatoni received a $30,000 dividend from Market. Donatoni must report the dividend as gross income, and is allowed a $15,000 dividends-received deduction.

Question

Quizplus · Accepted Answer

Since Donatoni Corporation owns 40% of Market, Inc., it likely uses the equity method of accounting for this investment. Under the equity method, dividends received are not reported as gross income but rather as a reduction in the investment account. Therefore, the dividends-received deduction does not apply.

Donatoni Corporation Owns 40% of Market, Inc