I have the answer for part (A) I just need help with (B) can u explain how to ge
ID: 2446699 • Letter: I
Question
I have the answer for part (A) I just need help with (B) can u explain how to get answer please.
Fisafolia Corporation has gross income from operations of $220,000 and operating expenses of $160,000 for 2014. The corporation also has $20,000 in dividends from publicly traded domestic corporations (ownership in all corporations was less than 20 percent).
a. Calculate the corporation's dividends received deduction for 2014.
$
b. Assume that instead of $220,000, Fisafolia Corporation has gross income from operations of $135,000. Calculate the corporation's dividends received deduction for 2014.
Explanation / Answer
a. Calculate the corporation's dividends received deduction for 2014.
Taxable Income = (Gross Income - operating expenses + Divindend recieved)
Taxable Income = (220000-160000+20000)
Taxable Income = 80000
Since ownership in all corporations was less than 20 percent)
Corporation's dividends received deduction = lower of (70% of Dividend Recieved ,70%of Taxable Income)
Corporation's dividends received deduction = lower of (70%*20000, 70%*60000)
Corporation's dividends received deduction = $ 14000
b. Assume that instead of $220,000, Fisafolia Corporation has gross income from operations of $135,000. Calculate the corporation's dividends received deduction for 2014.
Taxable Income = (Gross Income - operating expenses + Divindend recieved)
Taxable Income = (135000-160000+20000)
Taxable Income = -5000
Since ownership in all corporations was less than 20 percent)
If the dividends received deduction increases or creates a net operating loss, the limitation does not apply Since Taxable Income is negative than limitation of Taxable income is not applicable
Corporation's dividends received deduction = 70% of Dividend Recieved
Corporation's dividends received deduction = 70%*20000
Corporation's dividends received deduction = $ 14000