Jazz Corporation owns 10% of Favors Corp.stock.Favors distributed a $10,000 dividend to Jazz Corporation.Jazz Corp.'s taxable income (loss)before the dividend was ($6,000).What is the amount of Jazz's dividends received deduction on the dividend it received from Favors Corp.?

Question

Quizplus · Accepted Answer

The dividends received deduction for a corporation owning less than 20% of another corporation's stock is equal to 50% of the dividend received. Therefore, Jazz Corporation's dividends received deduction is ($10,000 x 0.50) = $5,000. It is important to note that the taxable income (loss) of Jazz Corporation before the dividend does not affect the calculation of its dividends received deduction.

Jazz Corporation Owns 10% of Favors Corp