Calculate the dividends-received deduction and taxable income for each independent scenario below. Assume there are no other income or deduction items.
a. During the current year, Purple Corporation reports $260,000 of gross income from operations and $170,000 of allowable business deductions. In addition, Purple receives dividends of $200,000 from Blue Corporation. Purple owns 25% of Blue and the dividends qualify for the dividends-received deduction.
b. During the current year, Yellow Corporation reports $160,000 of gross income from operations and $180,000 of allowable business deductions. In addition, Yellow receives dividends of $220,000 from Green Corporation. Yellow owns 15% of Green common stock and the dividends qualify for the dividends-received deduction.