Question

In: Accounting

Which of the following statements is not true for tax years beginning after 2017? a. Affiliated...

Which of the following statements is not true for tax years beginning after 2017?

a. Affiliated corporations that file consolidated returns can take 100% dividends

received deduction.

b. The dividends received deduction for a small investment in an unrelated corporation

is 50%.

c. The dividends received deduction for a large investment in a corporation is 65%.

d. There is no income limitation on the dividends received deduction.

Solutions

Expert Solution

Dividend received deduction (DRD) is a tax deduction provided to corporations on the dividends which they receive from other corporations in which it has ownership stake. DRD is provided so as to prevent the triple taxation of income. If there is no DRD then the dividend distributed will first taxed in the hands of dividend distributing corporation as corporate profits, then will be taxed as dividend in hands of corporation receiving such dividends and afterwards if the hands of individual shareholders of such corporation if it distributes dividend. So in order to avoid such triple taxation, DRD was introduced.

DRD is provided as under:

Percent ownership Deduction

<20% 50%

20% to 80% 65%

>80% 100%

NOTE : However in order to claim the Deduction, the corporaion paying the dividend must also be liable to pay tax.( i.e the dividend distributed must be subject to double tax).

So in accordance with the above law Statement 'd' (There is no income limitation on the dividends received deduction) is not true.

ekkarill92 answered 1 year ago
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