Which of the Following Statements Is Incorrect Regarding the Dividends

question 77

Multiple Choice

Which of the following statements is incorrect regarding the dividends received deduction?

• A)A corporation must hold stock for more than 90 days in order to qualify for a deduction with respect to dividends on such stock.
• B)The taxable income limitation does not apply with respect to the 100% deduction available to members of an affiliated group.
• C)If a stock purchase is financed 75% by debt, the deduction for dividends on such stock is reduced by 75%.
• D)The taxable income limitation does not apply if the normal deduction (i.e., 70% or 80% of dividends) results in a net operating loss for the corporation.
• E)None of the above.

---

Definitions:

Trading Security

A financial asset that is bought and sold with the intention of generating profits from short-term fluctuations in its price.

Retained Earnings

Profits that a company has kept or retained rather than distributing to shareholders as dividends.

Fair Value Method

An accounting approach that estimates the price of an asset or liability based on current market conditions.

Bonds

Long-term debt securities issued by corporations, municipalities, or governments that pay periodic interest payments to investors.