In the current year,Auburn Corporation (a calendar year taxpayer),has the following income and expenses:

Gross income from operations
$1,000,000
Expenses from operations
1,100,000
Dividends from Blond Corporation
200,000

Auburn Corporation owns 20% of the stock in Blond Corporation.The dividends received deduction for the current year is:

Question

In the current year,Auburn Corporation (a calendar year taxpayer),has the following income and expenses:
​
Gross income from operations
$1,000,000
Expenses from operations
1,100,000
Dividends from Blond Corporation
200,000
​
Auburn Corporation owns 20% of the stock in Blond Corporation.The dividends received deduction for the current year is:

Quizplus · Accepted Answer

The dividends received deduction (DRD) allows a corporation to exclude a portion of the dividends received from taxable income. The DRD is equal to the percentage of ownership multiplied by the amount of dividends received. In this case, Auburn Corporation owns 20% of the stock in Blond Corporation and received $200,000 in dividends. Therefore, the DRD is 20% x $200,000 = $40,000. However, the DRD cannot exceed taxable income. Since Auburn Corporation has a taxable loss of $100,000 ($1,000,000 - $1,100,000), the DRD is limited to $100,000 - $100,000 (taxable income) = $0. Therefore, the DRD for Auburn Corporation for the current year is $0.

In the Current Year,Auburn Corporation (A Calendar Year Taxpayer),has the Following