ExpertEasy1 markMultiple Choice
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)?
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
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.
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