Choices a b and c are incorrect per the above rule

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Unformatted text preview: 1, 1990) 75,000 On December 1, 1989, Ral received advance rental of $27,000 from a tenant for a three-year lease commencing January 1, 1990 to cover rents for the years 1990, 1991, and 1992. In conformity with GAAP, Ral did not include any part of this rental in its income statement for the year ended December 31, 1989. What portion of the dividend revenue should be included in Ral's 1989 taxable income? a. b. c. d. $150 $200 $300 $900 CPA-02210 Explanation Choice "c" is correct. Ral should include $300 of the dividend revenue in its 1989 taxable income. Rule: For corporations owning less than 20% of the stock of the distributing corporation, the dividends received deduction cannot exceed 70% of the taxable income without regard to the deduction for contributions, net operating losses, dividends received, and capital loss carrybacks. Dividend revenue 70% exclusion Taxable dividends $1,000 (700) $ 300 Choices "a", "b", and "d" are incorrect, per the above rule. CPA-02213 Type1 M/C 106. CPA-02213 A-D May 90 II #31 Corr Ans: D PM#12 R 3-99 Page 6 John Budd is the sole stockholder of Ral Corp., an accrual basis taxpayer engaged in wholesaling operations. Ral's retained earnings at January 1, 1989 amounted to $1,000,000. For the year ended December 31, 1989, Ral's book income, before federal income tax, was $300,000. Included in the computation of this $300,000 were the following: Dividends received on 500 shares of stock of a taxa...
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