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Practice CPA®CPA TCP Practice Exam 2Question 63

Easy1 markMultiple Choice

Area II: Entity Tax ComplianceTCPEntity TaxC Corp

CPA · Question 63 · Area II: Entity Tax Compliance

A C Corporation has $100,000 of taxable income. It owns 25% of another domestic corporation and receives a $10,000 dividend. What is the Dividends Received Deduction (DRD)?

Answer options:

A.

$5,000

B.

$6,500

C.

$10,000

D.

$8,000

How to approach this question

DRD Rates: <br/><20% Owned -> 50% DRD. <br/>20%-80% Owned -> 65% DRD. <br/>>80% Owned -> 100% DRD. <br/>Here: 25% Owned -> 65%.

Full Answer

B.$6,500✓ Correct

$6,500

IRC §243. For ownership between 20% and 80%, the DRD percentage is 65%.

Common mistakes

Using the old 70%/80% rates or the wrong ownership tier.

Question 62 All questions Question 64

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