Red Corporation, which owns stock in Blue Corporation, had net operating income of $200,000 for the year. Blue pays Red a dividend of S40,000. Red takes a dividends received deduction of $28,000. Which of the following statements is correct?

a. Red owns less than 20% of Blue Corporation.
b.Red owns 20% or more,
c. Red owns 80% of Blue Corporation.
d.Red owns 80% or more of Blue Corporation.
e.None of the above.

A corporation is a company owned by many people through the purchase of shares or stocks, corporations are described as a man in the law as it can be sued and it also has the power to sue.

Dividend is the amount paid by public quoted corporations to their share or stock holders.Dividends are a portion of the net income of a company.

Red’s dividends received deduction is 70% of the dividend received ($28,000 ÷ $40,000). The 70% dividends received deduction applies if ownership is 30% or more, but less than 70%.