Question

In 2019, Pine Corporation had losses of $20,000 from operations. It received $180,000 in dividends from a 25%-owned domestic corporation. Pine’s taxable income is $160,000 before the dividends-received deduction. What is the amount of Pine’s dividends-received deduction?

Answer 1

Consider the following calculations

Step-by-step explanation:

Net income per books $65,000

Add back:

Federal income taxes 9,700

Excess contributions 3,000

Life insurance premiums 10,000

$87,700

Subtract:

Tax-exempt interest (1,500)

Excess depreciation (4,500)

Taxable income $81,700

Dividend received deduction = 160000 x 80% = 128000 (full DRD doesn't create loss).

DRD will be 80% of taxable inome because percent partnership is 25% which is between 20 to 80%.