Question

# Riverbend Inc. received a \$305,000 dividend from stock it held in Hobble Corporation. Riverbend's taxable income...

Riverbend Inc. received a \$305,000 dividend from stock it held in Hobble Corporation. Riverbend's taxable income is \$2,380,000 before deducting the dividends received deduction (DRD), a \$78,000 NOL carryover, and a \$132,000 charitable contribution. Use Exhibit 16-6. (Round your tax rates to 1 decimal place. Leave no answer blank. Enter zero if applicable.) a. What is Riverbend’s deductible DRD assuming it owns 10 percent of Hobble Corporation?

Riverbend Inc. owns less than 20 % of Hobble Corporation, its DRD percentage is 70 %. So, its full DRD is ( 305000 * 70 % ) \$ 213500.

Riverbend Inc. modified taxable income for the taxable income limitation is ( \$2,380,000 - \$132,000 charitable contribution ) \$ 2248000.

Thus, the taxable income limit is ( \$ 2248000 * 70 % ) = \$ 1573600

Becuase the full \$ 213500 DRD is less than the taxable income limit, Riverbend may deduct the entire \$ 213500 DRD.

a. What is Riverbend’s deductible DRD assuming it owns 10 percent of Hobble Corporation?

\$ 213500

#### Earn Coins

Coins can be redeemed for fabulous gifts.