Windy Company has taxable income before DRD of $200,000.Included in that amount is a $10,000 dividend from a domestic corporation owned 10% by Windy and a $30,000 dividend from a domestic corporation owned 60% by Windy.What is the taxable income of Windy Company?

Question

Quizplus · Accepted Answer

The deduction for the DRD (dividends received deduction) will reduce the taxable income of Windy Company. The DRD for a 10% ownership is 50% of the dividend and for a 60% ownership is 65% of the dividend. Therefore, the DRD for Windy's dividends will be:

- $10,000 x 50% = $5,000
- $30,000 x 65% = $19,500

Total DRD = $5,000 + $19,500 = $24,500

Taxable income after DRD = $200,000 - $24,500 = $175,500

Therefore, the correct answer is C) $169,000.

Windy Company Has Taxable Income Before DRD of $200,000