Question

Riverbend Inc. received a $282,500 dividend from stock it held in Hobble Corporation. Riverbend's taxable income is $2,330,000 before deducting the dividends received deduction (DRD), a $69,000 NOL carryover, and a $101,000 charitable contribution. Use Exhibit 16-6. (Round your tax rates to 1 decimal place. Leave no answer blank. Enter zero if applicable.)

a. What is Riverbend’s deductible DRD assuming it owns 10 percent of Hobble Corporation?

Answer 1

The deductible Dividends Received Deduction (DRD) for Riverbend Inc. can usually be calculated as 50% of the dividend received if it owns 10% of Hobble Corporation, yielding a potential deduction of $141,250. However, consulting current tax laws or a professional is essential for an accurate figure.

Step-by-step explanation:

The question addresses a specific scenario concerning Riverbend Inc., which has received a dividend from Hobble Corporation and is looking to determine its deductible Dividends Received Deduction (DRD) given its ownership stake and other financial factors. Riverbend Inc. owns 10% of Hobble Corporation and has various financial figures to consider including taxable income, NOL carryover, and charitable contributions.

A key concept in this scenario is the DRD, which is a corporate tax deduction for companies that receive dividends from related entities. The percentage of ownership impacts the DRD rate. Since Riverbend Inc. owns 10% of Hobble Corporation, the DRD it's eligible for is typically 50% of the dividends received.

However, without specific DRD rates to reference, which might vary, we would typically calculate 50% of the $282,500 dividend, which would be $141,250.However, since tax laws and regulations are complex and can change, it's essential to consult the current IRS rules or a tax professional for the precise DRD percentage applicable to the given scenario.