Question

In the current year, Brown, a C corporation has gross income (before dividends) of $900,000 and deductions of $1,100,000 (excluding the dividends received deduction). Brown owns 15% of a Fortune 500 corporation and received dividends of $100,000 from that corporation during the current year. What is Brown's net operating loss? a) $100,000 b) $170,000 c) $200,000 d) $130,000

Answer 1

$170,000

Explanation:

Gross income is $900,000

Add dividends which is $100,000

Total income is $900,000+$100,000=$1,000,000

Deductions is $1,1000,000.

Note that the deductions is less Dividends Received Deduction (DRD)

Additional deductions due to dividends

Add DRD of which will be 70% of the dividends received hence 0.7*$100,000= $70,000 since he owned 15% of a Fortune 500 corporation

Total deductions is $1,1000,000+$70,000=$1,170,000

Loss=1,1700,000-$1,000,000=$170,000

Total net loss is $170,000