[Anonymous]

Ok, I’m confused.

According to Becker, if you have a positive TI after calculating, use the LESSER of the full DRD or DRD % times TI.

But according to ninja notes, if positive TI remains, use DRD % times TI. No lesser of or anything.

Am I missing something?

[Racergirl]

The DRD deduction is limited to TI times the % used to calculate the DRD. The limitation is not required if the full DRD would create or enhance a net operating loss. DRD is a 3 step process.

Example: Loss from X Company ($10,000)

Dividend received (owns 10% of stock of Y Company) $100,000

TI before DRD $90,000

Step 1: Full DRD $100,000 * 70% = $70,000

Step 2: Taxable Income Limitation $ 90,000 * 70% = $63,000 – Use this number

Step 3: Income/Loss with Full DRD $ 90,000 – $ 70,000 = $20,000

AUD - 76!
REG - 66, 78!
BEC - 69, 69, 75!
FAR - 70, 73, 79!
Ethics Test - 98!

ILBOE Certificate of Certified Public Accounting issued May 5, 2014
State of Illinois License effective August 1, 2014

CPAexcel, CPAreviewforfree, Ninja Notes

[Racergirl]

The DRD deduction is limited to TI times the % used to calculate the DRD. The limitation is not required if the full DRD would create or enhance a net operating loss. DRD is a 3 step process.

Example: Loss from X Company ($10,000)

Dividend received (owns 10% of stock of Y Company) $100,000

TI before DRD $90,000

Step 1: Full DRD $100,000 * 70% = $70,000

Step 2: Taxable Income Limitation $ 90,000 * 70% = $63,000 – Use this number

Step 3: Income/Loss with Full DRD $ 90,000 – $ 70,000 = $20,000

AUD - 76!
REG - 66, 78!
BEC - 69, 69, 75!
FAR - 70, 73, 79!
Ethics Test - 98!

ILBOE Certificate of Certified Public Accounting issued May 5, 2014
State of Illinois License effective August 1, 2014

CPAexcel, CPAreviewforfree, Ninja Notes

[Anonymous]

Thanks, I think I got it.

I guess one of Becker's examples was confusing me (see below):

TI before DRD $150,000

Step 1: Full DRD $100,000 * 80% = $80,000

Step 2: Taxable Income Limitation $ 150,000 * 80% = $120,000

Step 3: Income/Loss with Full DRD $ 150,000 – $80,000 = $20,000 – Use this number (Per Becker)

Why not use the $120,000 (limited to TI * DRD%) if the full DRD does not create a loss?

That's what I meant by using the “lesser of” Step 1 and Step 2.

[Anonymous]

Thanks, I think I got it.

I guess one of Becker's examples was confusing me (see below):

TI before DRD $150,000

Step 1: Full DRD $100,000 * 80% = $80,000

Step 2: Taxable Income Limitation $ 150,000 * 80% = $120,000

Step 3: Income/Loss with Full DRD $ 150,000 – $80,000 = $20,000 – Use this number (Per Becker)

Why not use the $120,000 (limited to TI * DRD%) if the full DRD does not create a loss?

That's what I meant by using the “lesser of” Step 1 and Step 2.

[Author]

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