Problem 11-4 Special Deductions and Limitations (LO 11.3) Fisafolia Corporation
ID: 2393958 • Letter: P
Question
Problem 11-4 Special Deductions and Limitations (LO 11.3) Fisafolia Corporation has gross income from operations of $210,000 and operating expenses of $160,000 for the current year. The corporatiorn also has $30,000 in dividends from publicly traded domestic corporations in which the ownership percentage was 45%. Below is the Dividends Received Deduction table to use for this problem Percent Ownership Less than 20% 20% or more, but less than 80% More than 80% Dividends Received Deduction Percentage 70% 80% 100% a. Calculate the corporation's dividends received deduction for the current year b. Assume that instead of $210,000, Fisafolia Corporation has gross income from operations of $135.,000, Calculate the corporation's dividends received deduction for the current year c. Assume that instead of $210,000, Fisafolia Corporation has gross income from operations of $158,000. Calculate the corporation's dividends received deduction for the current year.Explanation / Answer
A. Corporataion's Dividend Received deduction for the current year:
Dividend received deduction is lesser of the below two options
Dividend Received * 80%
30,000 X 80% = $24000
OR (Gross Income - Operating Expenses +Dividend Received )X 80%
210,000 - 160,000 + 30,000 = 80,000
80,000 x 80% = 64,000
Answer: $24,000
B. Dividend received deduction is lesser of the below two options
Dividend Received * 80%
30,000 X 80% = $24000
OR (Gross Income - Operating Expenses +Dividend Received )X 80%
135,000 - 160,000 + 30,000 = 5,000
5,000 x 80% = 4,000
Answer : $4,000
C. Dividend received deduction is lesser of the below two options
Dividend Received * 80%
30,000 X 80% = $24000
OR (Gross Income - Operating Expenses +Dividend Received )X 80%
158,000 - 160,000 + 30,000 = 28,000
28,000 x 80% = 22,400
Answer : $22,400