Dividends-received deduction(redirected from Dividends Received Deductions)
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.