This year, Prewer, Inc. received a $160,000 dividend on its investment consisting of 16 percent of the outstanding stock of TKS, Inc., a taxable domestic corporation.

Before considering this dividend,

Prewer had a $43,500 operating loss for the year.

It also had a $31,300 NOL carryover deduction from the prior year.

What is Prewer's taxable income this year?

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So confused right now.

I saw where this question had been previously submitted and answered. However, I am still confused. My research has led me to understand that when computing DRD the deduction is dependent upon specific rules.

1) if the allowed percentage of dividends received causes taxable income to be NOL, then the calculated portion of dividends is the DRD. ($160,000 x 50% = $80,000)

If 1) does not create NOL proceed to 2)

2) Multiply taxable income by the same percentage rate (i.e., based on the percentage of stocks held). ($116,500 x 50% = $58,250)

3) Allowable DRD is the lesser of 1) and 2).

I calculated that 2) was less; therefore,

Dividends $160,000

operating loss ($43,500)

Taxable income before deductions $116,500

NOL carryforward 31,300

DRD 58,250

Taxable income $26,950