Question

Jake, Inc reports the following results for the current year: Gross Income from Operations $300,000 Dividends from less than 30%-owned corporations 40,000 Operating expenses 30,000 Charitable Contributions 45,000 Fill in the blanks provided for Jake's Income Statement (Do not use $ signs, do not enter as a negative number) Gross Income 340000 Operating Expense 30000 Income before Charitable Deduction 310000 Charitable Deduction 31000 Taxable income before special deductions 265000 Dividends Received Deduction Taxable income

Answer 1

To calculate Dividends Recieved Deduction

First, the general rule states that the DRD is equal to 70% of the dividend received. Second, if the company receiving the dividend owns more than 20% but less than 80% of the company paying the dividend, the DRD amounts to 80% of the dividend received.

Here, Dividends from less than 30%-owned companies = 40000

So, Dividends Recieved Deduction = 40000 * 80 / 100

       = 32000

How to Calculate Taxable Income

Your Adjusted Gross Income (AGI) is calculated by subtracting the adjustments from your total income. Your AGI is the next step in figuring out your taxable income. You then subtract certain deductions from your AGI. The resulting amount is taxable income on which your taxes are calculated.

Taxable income before Special Deductions = 265000

So, Taxable Income = 265000 - 31000

     = 234000