C is corrent. Since the dividends were received from a less than 20%-owned taxable domestic corporation, they are eligible for a 70% dividends-received deduction. Thus, the amount of dividends to be included in taxable income is $1,000 — (70% x $1,000) = $300.
A is incorrect. The dividend must be included in gross income.
B is incorrect. $700 would be the allowable DRD.
D is incorrect. A 70% DRD would be allowed in computing taxable income.
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