W Co., a C corporation, owns 51% of Sub Corp. and 85% of Subsidiary Co., both...
W Co., a C corporation, owns 51% of Sub Corp. and 85% of Subsidiary Co., both domestic C corporations. W Co. had taxable income of over $100,000,000 this year(before dividends received deduction). W Co. had the following dividend income this year:$500,000 dividend income from Sub Corp.$1,000,000 dividend income from Subsidiary Co.What is that amount of W Co.’s dividends received deduction?
Homework Answers
Answer -
Calculation of Amount of W Co.’s Dividends Received Deduction
| Particulars | Ownership % | Explanation | Amount ($) | |
| I. | Dividend income from Sub Corp. |
51% [Given in question] |
C-corporations with 20% or more ownership, but less than 80% ownership stake can deduct 80% of dividend income received. = $500000 * 80% |
400000 |
| II. | Dividend income from Subsidiary Co. |
85% [Given in question] |
C-corporations with 80% or more ownership can deduct the full amount of dividend received = $1000000 * 100% |
1000000 |
| W Co.’s Dividends Received Deduction | I + II | 1400000 | ||
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