This year, Napa Corporation received the following dividends. KLP Inc. (a taxable Delaware corporation in which...

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This year, Napa Corporation received the following dividends. KLP Inc. (a taxable Delaware corporation in which...

This year, Napa Corporation received the following dividends.


KLP Inc. (a taxable Delaware corporation in which Napa holds an 8% stock interest)	$	72,000
Gamma Inc. (a taxable Florida corporation in which Napa holds a 90% stock interest)		137,000

Napa and Gamma do not file a consolidated tax return. Compute Napa’s dividends-received deduction??

business accounting

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Answer 1

Answer #1

Napa holds less than 20% stock interest in KLP Inc. Therefore, dividends received deduction in case of dividends received from KLP would be 50%.

In case of dividends received from Gamma, dividends received deduction would be 100% because KLP holds more than 80% stock interest in Gamma.

Therefore,

Napa’s dividends-received deduction = ($72,000 x 50%) + $137,000 = $173,000

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Answer 2

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