Question

Eagle Corporation, a calendar year C corporation, owns stock in Hawk Corporation and has taxable income of $100,000 for the year before considering the dividends received deduction. In the current year, Hawk Corporation pays Eagle a dividend of $130,000, which was considered in calculating the $100,000. What amount of dividends received deduction may Eagle claim if it owns 15% of Hawk's stock? a.$0 b.$84,500

Answer 1

$70,000

Step-by-step explanation:

According to general rules, the amount of Dividend received deduction (DRD) that a company may claim depends on percentage the company owns in the stock of the company paying the dividend. Generally Dividend received deduction is pegged at 70% except if the company making claim owns more than 20% of the company paying the dividend

To determine the amount of dividends received deduction Eagle may claim as a 15% owner of Hawk's stock,

Multiply the taxable income before the dividends received deduction by the deduction percentage ($100,000 × 70% = $70,000).