Question

# 2012 Corporate Tax Rate Schedule (partial) Taxable Income Greater Than But Less Than Or Equal To...

 2012 Corporate Tax Rate Schedule (partial) Taxable Income Greater Than But Less Than Or Equal To Tax Is Of the amount exceeding \$0 \$50,000 15% \$0 \$50,000 \$75,000 \$7,500 + 25% \$50,000 \$75,000 \$100,000 \$13,750 + 34% \$75,000 \$100,000 \$335,000 \$22,250 + 39% \$100,000

JKEB Corporation has the following revenues and expenses for the current tax year:

Sales revenue, net of returns . . . . . . . . . . . . . . . . . . . . . . . . . . .             \$100,000

Dividend Income (less than 20% owned investees) . . . . . . . . . .         25,000

Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           30,000

Normal business expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         40,000

1.     What is JKEB Corporation’s dividends-received deduction for the current tax year?

1.     for the current tax year.

Solution:

1).

From the given data the JKEB corporation's ownership is less than 20% in the investee companies.

Dividends received deduction =\$25000 * 70%= \$17500

2).

JKEB corporation's net loss = sales - cost of sales - business expenses

we know sales= \$100000, cost of sales = \$30000 and business expenses = \$82000

= \$100000 - \$30000 - \$82000

= \$12000

• When the dividends received by JKEBcorporation is added to the net loss, its income becomes \$13000.
•    Incase of company's making loss ,dividends received deduction is 80%of the company's income after adding the dividends received by it.

Therefore in this case , dividends received deduction = \$13000 * 80% = \$10400

so finally, Dividends received deduction is \$10400