1 For the current taxable year HIJ Inc had gross receipts fr

1- For the current taxable year, HIJ Inc. had gross receipts from operations of $230,000, operating and other expenses of $310,000, and $120,000 of dividends that it received from a 45 percent-owned domestic corporation. For the current taxable year, HIJ Inc. has taxable income or a net operating loss of what amount?

A.   $8,000 taxable income.

B.    $40,000 taxable income.

C.     $56,000 net operating loss.

D.     $80,000 net operating loss.

Solution

Correct Answer is C. $56,000 Net Operating Loss. Income ($2,30,000 + $1,20,000) = $ 3,50,000 Less: Expense = $ 3,10,000 Less: Dividends received deducyion ($1,20,000 X 80%) = $     96,000 Taxable Income = $   -56,000 Therefore, $56,000 is Net operating Loss. Note: Full Dividends received deduction is allowed because it creates a Net operating Loss.