Question

In each of the following independent situations, determine the dividends received deduction for 2018. Assume that none of the corporate shareholders owns 20% or more of the stock in the corporations paying the dividends.

Almond
Corporation Blond
Corporation Cherry
Corporation
Income from operations $700,000 $800,000 $900,000
Expenses from operations (600,000) (800,000) (910,000)
Qualifying dividends 100,000 100,000
100,000

a. The dividends received deduction for Almond Corporation is $

b. The dividends received deduction for Blond Corporation is $

c. The dividends received deduction for Cherry Corporation is $

Answer 1

a. The dividends received deduction for Almond Corporation is

$ 50,000

b. The dividends received deduction for Blond Corporation is

$ 50,000

c. The dividends received deduction for Cherry Corporation is

$50,000

Step-by-step explanation:

If a company owns less than 20% of the outstanding stock from another corporation, its DRD = 50% of the dividends received.

If a company owns 20% or more, but less than 80% of the outstanding stock from another corporation, its DRD = 65% of the dividends received.

If a company owns 80% or more of the outstanding stock from another corporation, its DRD = 100% of the dividends received.