Dividends-Received Deduction. Theta Corporation reports the following results fo
ID: 2464738 • Letter: D
Question
Dividends-Received Deduction. Theta Corporation reports the following results for the current year:
Gross profits on sales = $220,000
Dividends from less-than-20%-owned domestic corporations = 100,000
Operating expenses = 218,000
(a). What is Theta’s taxable income for the current year, assuming qualified production activities income is $2,000?
(b). How would your answer to Part a change if Theta’s operating expenses are instead $234,000, assuming qualified production activities income is zero or negative?
(c). How would your answer to Part a change if Theta’s operating expenses are instead $252,000, assuming qualified production activities income is zero or negative?
(d). How would your answers to Parts a, b, and c change if Theta received $75,000 of the dividends from a 20%-owned corporation and the remaining $25,000 from a less than-20%-owned corporation?
Explanation / Answer
Gross profit on sales 220000
Dividend from less than 20 % owned domestic corporations 100000
Operating expenses 218000
a.Taxable income
Qualified production activities income 2000
Taxable income =2000
Dividend received from subsidiaries is not taxable .
b. If operating income is less than operating expenses and hence there is net loss situation , here no income is taxable.
c.Dividend received from subsidiary is not taxable ,hence the answer will remain same as a and b respectively.