Dividends received from which of the following entities are ineligible for the dividends-received deduction?
Understand the Problem
The question asks which type of entity's dividends do not qualify for the dividends-received deduction. This deduction is generally for corporations receiving dividends from other corporations, so we need to identify the entity that doesn't fit this corporate structure or dividend type.
Answer
Dividends from REITs and RICs are ineligible.
Dividends received from a real estate investment trust (REIT) or from a regulated investment company's capital gain dividends are ineligible for the dividends-received deduction.
Answer for screen readers
Dividends received from a real estate investment trust (REIT) or from a regulated investment company's capital gain dividends are ineligible for the dividends-received deduction.
More Information
The dividends-received deduction (DRD) is designed to reduce double taxation on the same income stream. Dividends from entities such as REITs and RICs often have different tax characteristics, which is why they are excluded.
Tips
It is important not to confuse ordinary dividends with capital gain dividends since only the latter are excluded from the deduction when sourced from regulated investment companies.
Sources
- Dividends Received Deduction - Investopedia - investopedia.com
- 26 U.S. Code § 245 - Dividends received from certain foreign ... - law.cornell.edu
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