[j3w3ly]

I’m having a problem with the DRD exception. My understanding was that if the DRD creates or adds to a loss then the limitation does not apply. On to my question, from Becker REG3 Sim 1 #5: https://imgur.com/GHM0WOh

In the last two scenarios, the solution says the DRD is $7,000 and $144,000 respectively. I thought the limitation would not apply here because the DRD is adding to a loss? If I am wrong, can someone clarify the exception for me?

BEC - 84
AUD - 95
REG - 86
FAR - 7/11/14

[MikeHoncho]

I agree with the $7,000 DRD ($10,000 of dividends received multiplied by 70%). As for the last one, I would think the answer would be a DRD of $160,000 ($200,000 of dividends multiplied by 80%). It is hard to tell though without seeing the whole problem.

Done: 5/22/14

"Always do sober what you said you'd do drunk. That will teach you to keep your mouth shut."
- Ernest Hemingway

[MikeHoncho]

I agree with the $7,000 DRD ($10,000 of dividends received multiplied by 70%). As for the last one, I would think the answer would be a DRD of $160,000 ($200,000 of dividends multiplied by 80%). It is hard to tell though without seeing the whole problem.

Done: 5/22/14

"Always do sober what you said you'd do drunk. That will teach you to keep your mouth shut."
- Ernest Hemingway

[j3w3ly]

For the #8, it is the lesser of 80% * 200,000 = $160,000 or (-20,000+200,000)* 80% = 144,000. That's how they got the $144,000, which I understand now. But I'm still confused on #7. For the exception to apply, the DRD can only be creating a loss? If the DRD simply adds to a loss the limitation still applies? That seems to conflict with what is in the Becker material, page R3-24.

As far as seeing the whole problem, all you are supposed to do is look at the scenario and determine taxable income after applying the CCD and DRD.

BEC - 84
AUD - 95
REG - 86
FAR - 7/11/14

[j3w3ly]

For the #8, it is the lesser of 80% * 200,000 = $160,000 or (-20,000+200,000)* 80% = 144,000. That's how they got the $144,000, which I understand now. But I'm still confused on #7. For the exception to apply, the DRD can only be creating a loss? If the DRD simply adds to a loss the limitation still applies? That seems to conflict with what is in the Becker material, page R3-24.

As far as seeing the whole problem, all you are supposed to do is look at the scenario and determine taxable income after applying the CCD and DRD.

BEC - 84
AUD - 95
REG - 86
FAR - 7/11/14

[MikeHoncho]

If the DRD adds to or creates a net operating loss, then the DRD is NOT limited to taxable income.

Done: 5/22/14

"Always do sober what you said you'd do drunk. That will teach you to keep your mouth shut."
- Ernest Hemingway

[MikeHoncho]

If the DRD adds to or creates a net operating loss, then the DRD is NOT limited to taxable income.

Done: 5/22/14

"Always do sober what you said you'd do drunk. That will teach you to keep your mouth shut."
- Ernest Hemingway

[j3w3ly]

Ohhh, but you still take the percentage of the actual dividend, not the full amount of the dividend. I get it now, thank you!

BEC - 84
AUD - 95
REG - 86
FAR - 7/11/14

[j3w3ly]

Ohhh, but you still take the percentage of the actual dividend, not the full amount of the dividend. I get it now, thank you!

BEC - 84
AUD - 95
REG - 86
FAR - 7/11/14

[Author]

Replies