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Category: Tax
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Experience:  CPA with tax experience.
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Hoover, Inc. had gross receipts from operations of $230,000,

Resolved Question:

Hoover, Inc. had gross receipts from operations of $230,000, operating and other expenses of $310,000, and dividends received from a 45 percent-owned domestic corporation of $120,000. Hoover’s tax position for the year is:

a. $8,000 taxable income
b. $56,000 net operating loss
c. $40,000 taxable income
d. $80,000 net operating loss
Submitted: 6 years ago.
Category: Tax
Expert:  JKCPA replied 6 years ago.
Hi Customer,

Thanks for your question. The answer is:

b. A $56,000 net operating loss
Income ($230,000 + $120,000)=$350,000
-Expenses (310,000)
-Dividends-received deduction 80% (96,000)
=Taxable income $(56,000)
The full dividends-received deduction is allowed because it creates an NOL.

Hope this helps!
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