Red Corporation,which owns stock in Blue Corporation,had net operating income of $400,000 for the year.Blue pays Red a dividend of $60,000.Red takes a dividends received deduction of $48,000.Which of the following statements is correct?
A)Red owns less than 20% of Blue Corporation.
B)Red owns 20% or more, but less than 80% of Blue Corporation.
C)Red owns 80% of Blue Corporation.
D)Red owns 80% or more of Blue Corporation.
E)None of the above.

Question

Quizplus · Accepted Answer

Red's dividends received deduction is 80% of the dividend received ($48,000 ÷ $60,000).The 80% dividends received deduction applies if ownership is 20% or more,but less than 80%.

Red Corporation,which Owns Stock in Blue Corporation,had Net Operating Income