Jazz Corporation owns 50% of Williams Corp.stock.Williams distributed a $10,000 dividend to Jazz Corporation.Jazz Corp.'s taxable income before the dividend was $100,000.What is the amount of Jazz's dividends received deduction on the dividend it received from Williams Corp.?

Question

Quizplus · Accepted Answer

Jazz Corporation owns 50% of Williams Corp. stock, which means it meets the ownership requirement for the dividends received deduction. 
The calculation of the deduction is based on the percentage of ownership and taxable income. 
The formula is: Dividend Received Deduction = Dividend Received x ((Corporate Taxable Income + Dividend Received)/Corporate Taxable Income)
In this case, the dividend received is $10,000 and Jazz Corporation's taxable income before the dividend was $100,000. So, the calculation will be: 
$10,000 x ((100,000 + 10,000)/100,000) = $6,500
Therefore, the amount of Jazz Corporation's dividends received deduction on the dividend it received from Williams Corp. is $6,500. The answer is C.

Jazz Corporation Owns 50% of Williams Corp