Question

In 2017, Parvifolia, Inc. had $403,000 of revenue from operations and $160,000 of dividends from non-affiliated...

In 2017, Parvifolia, Inc. had $403,000 of revenue from operations and $160,000 of dividends from non-affiliated 15-percent-owned domestic corporations. The corporation's operating expenses totaled $410,000. What is Parvifolia, Inc.'s dividends received deduction for 2017?

1.

$105,000
2.

$112,000
3.

$107,100
4.

$128,500
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Answer #1

Answer:

As per the technical rule for the application of DIvidends Received Deduction (DRD), if a Corporation receives Dividend from another corporation, then the Payee (Recepient) can take DRD deduction, and it depends upon the percentage of Ownership.

If the Ownership percentage is less than 20%, then DRD = 70% of the Dividends received.

Here, Pervifloia,Inc. has owned only 15% of stake in other company.

So, DIvidends Received Deduction= income before deduction- Deduction %

= 70% ($1,53,000) = $1,07,100.

Working note:

Income before deduction = Gorss Profit -Expenses+Dividends

=$403,000-$410,000+$160,000

=$153,000

Answer is Option "3"

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