Copper Corporation owns stock in Bronze Corporation and has net operating income of $900,000 for the year.Bronze Corporation pays Copper a dividend of $150,000.What amount of dividends received deduction may Copper claim if it owns 65% of Bronze stock (assuming Copper's dividends received deduction is not limited by its taxable income)?
A)$0.
B)$105,000.
C)$120,000.
D)$150,000.
E)None of the above.

Question

Quizplus · Accepted Answer

The dividends received deduction (DRD) is equal to the lesser of (a) the amount of dividends received or (b)  dividends received multiplied by the percentage of ownership. 
Copper owns 65% of Bronze, so the DRD for Copper will be $97,500 (65% x $150,000). This is less than the net operating income of $900,000, so Copper can fully utilize the DRD. Therefore, Copper will not pay tax on the $97,500 dividend income. 
Hence, the best choice is C.

Copper Corporation Owns Stock in Bronze Corporation and Has Net