ExpertHard1 markMultiple Choice
CPA · Question 32 · Area V: Entity Taxation
A C corporation owns 25% of the stock of another domestic corporation. The C corporation received $100,000 in dividends from this investment. The C corporation's taxable income before the dividends-received deduction (DRD) is $200,000. What is the amount of the DRD?
A C corporation owns 25% of the stock of another domestic corporation. The C corporation received $100,000 in dividends from this investment. The C corporation's taxable income before the dividends-received deduction (DRD) is $200,000. What is the amount of the DRD?
Answer options:
A.
$50,000
B.
$100,000
C.
$65,000
D.
$80,000
How to approach this question
DRD Tiers: <20% own = 50% DRD. 20%-<80% own = 65% DRD. >=80% own = 100% DRD.
Full Answer
C.$65,000✓ Correct
C
Since the corporation owns 25% (which is between 20% and 80%), the applicable Dividends-Received Deduction (DRD) percentage is 65%. $100,000 * 65% = $65,000.
Common mistakes
Using the old 80% rate or the 50% rate for small ownership.
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