If Corporation A receives dividends from Corporation B, the dividends would be subject to triple taxation....

If Corporation A receives dividends from Corporation B, the dividends would be subject to triple taxation. What tax provision is available to corporations that would prevent or minimize triple taxation? Briefly explain.

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Expert Solution

tax provision is available to corporations that would prevent or minimize triple taxation is Dividends Received Deduction (DRD).

Under DRD, Corporation A can take deduction for dividends received from Corporation B while calculating Corporation A's taxable income.

The amount of deduction allowable shall depend on the Corporation's A holding percentage in Corporation B.

If Corporation A's holding in Corporation B is less than 20%, then the deduction shall be 70% of the dividend received.

If Corporation A's holding in Corporation B is from 20% and upto 80%, then the deduction shall be 80% of the dividend received.

If Corporation A's holding in Corporation B is more than 80%, then the deduction shall be 100% of the dividend received.

Suppose Corporation A's holding in Corporation B is 60% and dividend recieved from Corporation B is $15,000 , then the dividend received deduction (DRD) shall be 80% of $15,000 i.e. $12,000

ekkarill92 answered 1 year ago

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