Jazz Corporation owns 50% of the Williams Corp. stock. Williams distributed a $10,000 dividend to Jazz Corporation. Jazz Corp.'s taxable income before the dividend was $100,000.
What is the amount of Jazz's dividends received deduction on the dividend it received from Williams Corp.?
Cash Dividends is a type of incentive being given by a corporation to both its common and preferred shareholders following accumulating enough revenues. Thru consistent cash dividends payout, a corporation will be able to make its business look more profitable to the investing public due to higher rate of return of its shares.
Answer and Explanation:
Answer: C. $8,000
Jazz can deduct 80% of the dividend income he received since his holding to William Corp. is at 50% which is within the range of the aforementioned deductible rate. Hence, the solution for this problem is: 80% x $10,000 = $8,000
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from Finance 101: Principles of FinanceChapter 16 / Lesson 1