What is Dividends received deduction (DRD)?
In short
The dividends received deduction (DRD) lets a C corporation deduct part or all of the dividends it receives from other US corporations, reducing multiple layers of corporate tax.
Key takeaways
- 50% if the recipient owns less than 20%, 65% if it owns 20% to under 80%, and 100% for members of an affiliated group.
- The 50% and 65% deductions can be limited by taxable income.
- Holding period rules apply, and individuals can't claim it.
Where it's tested
REG: C Corporation Taxation — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
A corporation owns 30% of the stock of another domestic corporation and receives a $100,000 dividend. Ignoring the taxable income limitation, what is the dividends-received deduction?