Question

In each of the following independent situations, determine the dividends received deduction for the calendar year C corporation.

The Rose Corporation owns 15%, Pansy owns 10% and Daffodil owns 55% of the stock in the corporations paying the dividends.

Rose Corporation Pansy Corporation Daffodil Corporation Income from operations $1,200,000 $1,200,000 $1,200,000 Expenses from operations (800,000) (1,300,000) (1,500,000) Qualifying dividends 400,000 400,000 400,000

The dividends received deduction for Pansy Corporation is

EXHIBIT 12.5 Dividends Received Deduction Percentage of Ownership by Corporate Shareholder Deduction Percentage Less than 20% 50% 20% or more (but less than 80 %) 80% or more 65% 100% The payor corporation must be a member of an affiliated group with the recipient corporation

Answer 1

As per US federal tax rules, below is the calculation of Dividends Received Deduction:

Rose Corporation: 60000/-

From Pansy Corporation = 50% (15% of 400000) = 30000

From Daffodil Corporation = 50% (15% of 400000) = 30000

Pansy Corporation: 40000/-

From Rose Corporation = 50% (10% of 400000) = 20000

From Daffodil Corporation = 50% (10% of 400000) = 20000

Pansy Corporation: 286000/-

From Rose Corporation = 65% (55% of 400000) = 143000

From Daffodil Corporation = 65% (55% of 400000) = 143000