Question

This year, Napa Corporation received the following dividends. $ 57,000 KLP Inc. (a taxable Delaware corporation in which Napa holds an 8% stock interest) Gamma Inc. (a taxable Florida corporation in which Napa holds a 90% stock interest) 122,000 Napa and Gamma do not file a consolidated tax return. Compute Napa's dividends-received deduction Dividends-received deduction

Answer 1

Solution:

Calculation of Dividend Received Deduction:

No.	Company	Dividend Received	Percentage of Ownership	Old Deduction Percentage	Deduction (Old Rules)	New Deduction Percentage	Deduction (New Rules)
1	KLP Inc.	$                      57,000	8% (Less than 20%)	70%	$         39,900	50%	$            28,500
2	Gamma Inc.	$                    122,000	90% ( 80% or more)	100%	$      122,000	100%	$         122,000
Totals					$      161,900		$         150,500

Notes:

1) As year of deduction is not mentioned in the question, We have presented the answer both as per old and new deduction rates.