wo days before the ex-dividend date, Drexel Corporation buys 100 shares of Zebra Corporation stock (less than 1%) for $200,000. Drexel Corporation receives $10,000 of dividends from Zebra Corporation. Two weeks after the ex-dividend date, Drexel Corporation sells the Zebra Corporation stock for $190,000. Which of the following statements is correct?

Question

A) Drexel Corporation cannot recognize a capital loss.
B) Drexel Corporation cannot take a dividends-received deduction on the Zebra Corporation dividend.
C) Drexel Corporation will be allowed a 50% dividends-received deduction when reporting the Zebra Corporation dividend.
D) Drexel Corporation will receive no dividends-received deduction because the stock was purchased ex-dividend.

Answer 1

B) Drexel Corporation cannot take a dividends-received deduction on the Zebra Corporation dividend.

The forty-six-day minimum stock ownership requirement prevents taking a dividends-received deduction.