Red Corporation, which owns stock in Blue Corporation, had net operating income of $200,000 for the year. Blue pays Red a dividend of $40,000. Red takes a dividends received deduction of $28,000. Which of the following statements is correct?
A) Red owns 80% of Blue Corporation.
B) Red owns 20% or more, but less than 80% of Blue Corporation.
C) Red owns less than 20% of Blue Corporation.
D) Red owns 80% or more of Blue Corporation.
E) None of the above.

Question

Quizplus · Accepted Answer

The dividends received deduction for ownership of less than 20% is 50%, which matches the $28,000 deduction on a $40,000 dividend.

Red Corporation, Which Owns Stock in Blue Corporation, Had Net