Dividends-received deduction

(redirected from Dividends Received Deduction)
Also found in: Acronyms.

Dividends-received deduction

A corporate tax deduction on income allowed by company A that is in ownership of shares of company B and receives dividends on the shares of company B.

Dividends-Received Deduction

A reduction in the taxable income of a company when it receives dividends from stock it owns in another company. A company is eligible for a 70% dividends-received deduction if it owns less than 20% of the second company, 80% if it owns between 20% and 80% of the company, and 100% if it owns more than that. A dividends-received deduction exists in order to reduce the effects of triple taxation on publicly-traded companies; that is, the company must pay corporate taxes and its shareholders must pay capital gains taxes. The dividends-received deduction allows companies to mostly avoid a third tax on the same earnings.
References in periodicals archive ?
This example makes clear that the dividends received deduction equal to 85 percent of qualifying dividends is allocated solely against qualifying dividends.
In general, dividends on stock are subject to a dividends received deduction (see IRC [Section] 243 and 953(d) ).
21) See NYSBA Comments on Dividends Received Deduction, TAX NOTES TODAY, March 22, 2005 (2005 TNT 54-18), noting that the general principle of section 41(f) (holding that the attributes go with the trade or business that generated them) leaves open the question of whether the various section 965 attributes attach to the CFC, the direct U.
Either dividends paid from these amounts would be subject to the dividends received deduction under IRC Section 243 or not.
Amounts deducted pursuant to the dividends received deduction.
Domestic dividend income is for the most part eliminated from federal taxable income by operation of the federal dividends received deduction (in section 243 of the Internal Revenue Code).
The ordinary income accrued under the OID-like rules is not a dividend and therefore a corporate holder would apparently not be eligible for the 70% dividends received deduction (DRD).
The portions of the distributions deemed "Ordinary Income, Tax Exempt Income, Long-Term Gains, Qualified Dividend Income, Dividends Received Deduction, Direct U.
The company also recognized $20 million in tax benefits primarily as a result of the new Dividends Received Deduction provided in the American Jobs Creation Act, which was signed into law on October 22, 2004.
The consolidated return rules or dividends received deduction eliminate the second level of taxation in most cases involving a U.
Use of an FSC will result in double taxation because the S shareholders are not eligible for the special FSC dividends received deduction under Sec.
An important specific exception, however, is the corporate dividends received deduction (DRD).