Question

Copper Corporation, a calendar year C corporation, owns stock in Bronze Corporation and has net operating income of 900,000 for the current year. Bronze Corporation pays Copper a dividend of 150,000. What amount of dividends received deduction may Copper claim if it owns 85

1) 97,500
2) 75,000
3) 150,000
4) 120,000
5) None of these choices are correct.

Answer 1

Copper Corporation can claim a dividends received deduction of the entire $150,000 it received from Bronze Corporation since it owns an 85% stake, making it eligible for a 100% deduction of the dividend. Thus, the option 3 is the correct answer.

Step-by-step explanation:

The student is asking about the dividends received deduction that Copper Corporation can claim after receiving a dividend from Bronze Corporation. If Copper Corporation owns an 85% stake in Bronze Corporation, the relevant tax code provisions allow for a dividends received deduction of up to 100% of the dividend if certain criteria are met, including ownership percentage thresholds.

Since Copper Corporation owns an 85% stake in Bronze Corporation, it is eligible for the 100% dividends received deduction. Consequently, Copper Corporation can claim a deduction of the entire $150,000 dividend it received. Therefore, the correct answer is (3) $150,000.