Question

3. Suppose that during 2018, C Corp received a $30,000 dividend from Apple Inc. and that C Corp owns less than 1 percent of the Apple Inc. stock. Further assume that C Corp’s taxable income before the dividend received deduction was $50,000. To arrive at the taxable income of $50,000 (before the DRD), C Corp deducted a $3,000 NOL Carryover and a $4,000 Capital Loss Carryover. What is C Corp Dividends Received Deduction

Answer 1

$15,000

Step-by-step explanation:

Given:

dividend C Corp received = $30,000

C Corp’s taxable income before the dividend received deduction = $50,000

NOL Carryover deducted = $3,000

Capital Loss Carryover = $4,000

C Corp owns less than 1 percent of the Apple Inc. stock,

Thus, dividend received deduction will be 50%

DRD = Dividend × 50% = $30,000 × 50% = $15,000

Total taxable income = $30,000 + $3000 + $4000 = $57,000

Now,

50% of the total taxable income = 50% of $57,000 = $28,500

Since, the DRD on total on total taxable income (i.e $28,500) is greater than the DRD on divided (i.e $15,000)

Hence, the C Corp Dividends Received Deduction will be $15,000