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Category: Tax
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Experience:  CPA with tax experience.
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One year Potter, Inc. had gross income from sales of $210,000,

Resolved Question:

One year Potter, Inc. had gross income from sales of $210,000, business expenses of $230,000, and dividend income from U.S. corporations of $150,000. Potter’s 80 percent dividends-received deduction was:

a. $104,000
b. $120,000
c. $0
d. $150,000
Submitted: 6 years ago.
Category: Tax
Expert:  JKCPA replied 6 years ago.
Hello Customer,

Thanks for your question.

The answer is a. $104,000
Taxable income = 210,000 - 230,000 + 150,000 = 130,000. Although the allowable 80% dividends-received deduction is 120,000 (150,000 x 80%), there is a limitation based on 80% of taxable income, 130,000 x 80% = 104,000.

Hope this helps!

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