Question

The corporate dividends‐received deduction ___________.
a. Must exceed the applicable percentage of the recipient shareholder's taxable income.
b. Is affected by a requirement that the investor corporation must own the investee's stock for a specified minimum holding period.
c. Is unaffected by the percentage of the investee's stock owned by the investor corporation.
d. May be claimed by S corporations.

Answer 1

Answer:

B) is affected by the requirement that the investor corp must own the investee's stock for a specified minimum holding period

Explanation:

Answer 2

Answer:

B) Is affected by a requirement that the investor corporation must own the investee's stock for a specified minimum holding period.

Explanation:

The DRD deduction allows corporations to deduct dividends received from other corporations from their income. This deduction varies from 70-100% of total dividends received. If the company's stock ownership is:

• less than 20%, it can deduct 70% of distributed dividends
• more than 20% but less than 80%, it can deduct 80% of distributed dividends
• 80% or more, it can deduct 100$ of distributed dividends

The minimum holding period that enables a corporation to request a DRD is 45 days prior to receiving the dividends.