Thunder,Inc.has invested in the stock of several corporations and has $500,000 operating income before dividends: Calculate Thunder's dividends-received deduction and taxable income:

Question

Thunder,Inc.has invested in the stock of several corporations and has $500,000 operating income before dividends:   Calculate Thunder's dividends-received deduction and taxable income:

Quizplus · Accepted Answer

The dividends-received deduction (DRD) is calculated as follows:
- 70% DRD for dividends received from corporations in which Thunder, Inc. owns less than 20% of the stock: $100,000 x 70% = $70,000
- 80% DRD for dividends received from corporations in which Thunder, Inc. owns 20% or more but less than 80% of the stock: $120,000 x 80% = $96,000
- 100% DRD for dividends received from corporations in which Thunder, Inc. owns 80% or more of the stock: $80,000 x 100% = $80,000

Total DRD = $70,000 + $96,000 + $80,000 = $246,000

Taxable income = operating income before dividends - DRD = $500,000 - $246,000 = $254,000

Therefore, Choice B is the correct answer, with a DRD of $246,000 and taxable income of $254,000.