Question

The Bay Fig Corporation has $350,000 of taxable income from operations for the current year, and dividends of $50,000 received from 10-percent-owned domestic corporations. How much is the Bay Fig Corporation's dividends received deduction for the current year

Answer 1

Answer: $25,000

Explanation:

When a company owns less than 20% of another company and receives dividends from that company, they are allowed to deduct 50% of that dividend for tax purposes.

Bay Fig owns 10%(less than 20%) of the domestic corporations so qualifies for the 50% reduction:

= Dividends * 50%

= 50,000 * 50%

= $25,000