I don't understand how to answer question # 2 . Assuming that JKEB Corporation's normal business expenses were $82,000 instead of $40,000 compute its dividends received deduction for the current tax year. I know I'm probably using the DRD formula but I'm confused.

Taxable Income Greater Than $0 $50,000 $75,000 $100,000 2012 Corporate Tax Rate Schedule (partial) But Less Than Or Tax Is Of the amount Equal To exceeding $50,000 15% $0 $75,000 $7,500 + 25% $50,000 $100,000 $13,750 + 34% $75,000 $335,000 $22,250 + 39% $100,000 JKEB Corporation has the following revenues and expenses for the current tax year: Sales revenue, net of returns . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividend Income (less than 20% owned investees) . . . . . . . . . . Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Normal business expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $100,000 25,000 30,000 40,000 1. What is JKEB Corporation's dividends-received deduction for the current tax year? 2. Assuming that JKEB Corporation's normal business expenses were $82,000 instead of $40,000, compute its dividends-received deduction for the current tax year. JKEB Corporation incurred the following capital gains and losses in tax year 2012: Short Term Capital Gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Short Term Capital Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long Term Capital Gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long Term Capital Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20,000 (10,000) 5,000 (28,000) JKEB's prior corporate tax returns reflect the following net capital gain/ (loss): 2008 - $6,000 gain 2009$8,000 gain 2010($3,000) loss 2011$1,000 gain 3. Calculate the net capital gain (loss) for 2012. How is this reported on the 2012 Form 1120? 4. Calculate the amount of capital loss carryback (if any) to tax years 2008 through 2011 inclusive. 5. Calculate the amount of capital loss carryforward (if any) to 2013. How will this loss be treated in 2013 (i.e., as a short-term or long-term capital loss)? JKEB Corporation had the following items during its 2012 tax year: Net income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $150,000 Dividends received (from less than 20% owned investees). . . . . . . . . . . 10,000 Charitable contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000 Net operating loss carryover from 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000 Long-term capital gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000 Long-term capital losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000 Short-term capital gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000 Capital loss carryover from 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,000 Tax Credit........................................................................... 4,500 6. Compute JKEB Corporation's 2012 taxable income and income tax liability before tax credits. 7. What are the nature and amount of any carryovers to 2013? 8. What is the taxable amount due after using the tax credit? Answers: 1. 25,000 X 70% = 17,500 2. 3. Net Capital Gains for 2012 is 20,000-10,000+5,000-28,000=13,000 (Loss) It will be reported as long term capital. 4. Carryback to 2008 = 0 Carryback to 2009 = 8,000 Carryback to 2010= 0 Carryback to 2011 = 1,000 Carryback is allowed for 3 years and for maximum of gain reported in that year. 5. Carryforward to 2013 = loss minus carryback 13,000-8000-1000 = 4000 Is would be a short term. 6. Net Income from Operations Dividends Income before deductions 150,000 10,000 160,000 Less NOL carryover from 2011 Charitable Contributions Dividends Received 30,000 13,000 (10%*160,000-30,000) 7,000 (70%*10,000) 50,000 Taxable income 110,000 (15%*50,000) + (25%*25,000) + (34%*25,000) + (39%*10,000) = 7,500 + 6,250 + 8,500 + 3,900 = 26,150 Tax liability before Tax Credit 26,150 7. The nature and carryover to 2013 is charitable contributions carryover from 2011 30,000 - 13,000 = 17,000 Loss carryover from 2011 9,000 - 5,000 = 4,000 8. The taxable amount due after using the tax credit would be taking the tax liability minus the tax credits. 26,150 - 4,500 = 21,650