ExpertEasy1 markMultiple Choice
CPA · Question 37 · Area 3: Entity Tax Compliance
A C Corporation owns 85% of a subsidiary. The subsidiary pays a dividend of $100,000 to the parent. What is the Dividends Received Deduction (DRD)?
A C Corporation owns 85% of a subsidiary. The subsidiary pays a dividend of $100,000 to the parent. What is the Dividends Received Deduction (DRD)?
Answer options:
A.
$50,000 (50%)
B.
$65,000 (65%)
C.
$85,000 (85%)
D.
$100,000 (100%)
How to approach this question
1. Identify Ownership %: 85%.<br/>2. Identify DRD Tier: <br/> - < 20%: 50% DRD.<br/> - 20% - <80%: 65% DRD.<br/> - 80%+: 100% DRD.<br/>3. Result: 100% deduction.
Full Answer
D.$100,000 (100%)✓ Correct
Since the ownership exceeds 80%, the corporation qualifies for the 100% Dividends Received Deduction.
Common mistakes
Using the 65% rate.
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