Application
Generally, if a corporation receives dividends from another corporation, it is entitled to a deduction of 70 percent of the dividend it receives. If the corporation receiving the dividend owns 20 percent or more, however, then the amount of the deduction increases to 80 percent. If, on the other hand, the corporation receiving the dividend owns more than 80 percent of the distributing corporation, it is allowed to deduct 100 percent of the dividend it receives.
Note that in order for the deduction to apply, the corporation paying the dividend must also be liable for tax (i.e., it must be subject to the double taxation that the deduction is intended to prevent).
Read more about this topic: Dividends Received Deduction
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