Dividends-received deduction

(redirected from Dividends Received Deductions)

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 ?
4) Dividends received deductions (DRDs) reduce regular taxable income but do not reduce E&P and so are generally not allowed for ACE purposes.
Thus, for example, Federal income taxes and capital losses are deductible; charitable contributions are allowable without regard to the 10% limit; but net operating loss and dividends received deductions are not allowed.