ABC Company owns 40 percent of JMT Company and 95 percent of DEM Company.JMT pays an $80,000 dividend to ABC and DEM pays a $40,000 dividend to ABC in the current year.Assuming that ABC has $1,000,000 of taxable income, calculate ABC's dividends received deduction for the current year.

Question

Quizplus · Accepted Answer

ABC's dividends received deduction is $92,000, which is calculated as follows:Dividend from JMT: $80,000 x 40% = $32,000Dividend from DEM: $40,000 x 95% = $38,000Total dividends received deduction: $32,000 + $38,000 = $92,000

ABC Company Owns 40 Percent of JMT Company and 95