Crane and Loon corporations, two unrelated calendar year C corporations, have the following transactions for the current year. Crane Loon Gross income from operations $180,000 $300,000 Expenses from operations 255,000 310,000 Dividends received from domestic corporations (15% ownership) 100,000 230,000 Click here to access the dividends received deduction table. a. Compute the dividends received deduction for Crane Corporation. $fill in the blank 1 b. Compute the dividends received deduction for Loon Corporation. $fill in the blank 2

To compute the Dividends Received Deduction (DRD) for both Crane and Loon Corporations, we need to follow the IRS rules for the DRD. For corporations that own less than 20% of the distributing corporation, the DRD is 50% of the dividends received. ### Crane Corporation: 1. **Dividends Received:** $100,000 2. **DRD Percentage:** 50% 3. **DRD Calculation:** $100,000 * 50% = $50,000 However, the DRD is limited to 50% of the corporation's taxable income, calculated without regard to the DRD itself and any net operating loss (NOL) carrybacks. Crane Corporation has a net operating loss (NOL) from operations: - **Gross Income from Operations:** $180,000 - **Expenses from Operations:** $255,000 - **Net Operating Loss:** $255,000 - $180,000 = $75,000 Since Crane Corporation has an NOL, the taxable income limitation does not apply, and the full DRD can be taken. **Dividends Received Deduction for Crane Corporation:** $50,000 ### Loon Corporation: 1. **Dividends Received:** $230,000 2. **DRD Percentage:** 50% 3. **DRD Calculation:** $230,000 * 50% = $115,000 Similarly, we need to check

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