STU Corporation has taxable income before DRD of $27,000 that includes a dividend of $30,000 from a large publicly-traded domestic corporation.What is the taxable income of STU Corporation?

Question

Quizplus · Accepted Answer

DRD (Dividends Received Deduction) allows corporations to deduct a portion of dividends received from another corporation. In this case, STU Corporation received a dividend of $30,000, which is eligible for a DRD of 50% (since the dividend is received from a domestic corporation). Therefore, the DRD for STU Corporation is $15,000 ($30,000 x 50%).

Taxable income before DRD is $27,000, so subtracting the DRD of $15,000 from it gives a taxable income of $12,000 ($27,000 - $15,000).

Therefore, the taxable income of STU Corporation is $12,000, which is option D.

STU Corporation Has Taxable Income Before DRD of $27,000 That