Bass Corporation received a dividend of $100,000 from Trout Corporation.Bass owns 25% of the Trout Corporation stock.Assuming it is not subject to the taxable income limitation,Bass's dividends received deduction is $80,000.

Question

Quizplus · Accepted Answer

Since Bass owns 25% of Trout Corporation's stock, it is eligible for a dividends received deduction of 70% of the dividend received, which in this case is $70,000 ($100,000 x 0.70). Since this amount is less than the $80,000 deduction limit, Bass's dividends received deduction is limited to $70,000. Therefore, the statement that Bass's dividends received deduction is $80,000 is false.

Bass Corporation Received a Dividend of $100,000 from Trout Corporation