Nobody downloaded yet

The Dividend Received Deduction - Term Paper Example

Comments (0) Cite this document
Dividend is as a distribution or an allotment in form of liquid money, property or stock from a company paid to the shareholder out of the business proceeds. In the event a taxpayer receives a dividend, the person receives tax at a rate in which his or her dividend income fits…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER91% of users find it useful
The Dividend Received Deduction
Read TextPreview

Extract of sample "The Dividend Received Deduction"

Download file to see previous pages This paper broadly explores the concept of dividends received deduction.
Dividend moves from one company to another before it reaches an individual taxpayer, who happens to be a shareholder in the receiving company. For example, if there are two corporations, A and B in such a way that B has shares in A then the dividend will be taxed twice before it reaches the final shareholder, who also will be taxed. This means there will be two 35% taxation at the corporate level and one 23.8% at an individual taxpayer level hence making the real tax to be nearly 68%. This would even be worse when the dividend has to move a long a series of corporations before it reaches the final stockholder. For example, a situation where company A pays dividend to company B who then pays to C that in turn pays them to the individual shareholders.
Following the above stated reasons, pertaining to double taxation, dividends are not taxable thrice or more. As a result, dividends received by a company will be 70% tax-free. Rumpf (2011) asserts that this condition holds unless the corporation in question faces disqualification from this privilege due to some reasons. Even so, when deciding an individual’s dividend income, it is essential to comprehend or, rather, take into account the relationship between dividend and other taxable partaking such as straddles and constructive sales.
The history of dividends received deduction is completely different from that of certain income of tax-exempt corporations. Revenue Ruling 104, 1953-1 C.B. 68 fully explores the policy. According to this ruling, the belief that a corporate tax is paid prior to earnings from which the dividends are distributed supports the credit for dividends earned. In other words, a corporate tax had been paid on the proceeds that give rise to dividends ahead of the distribution. According to Rakshit and Sarkar (2013), this ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
(“The Dividend Received Deduction Term Paper Example | Topics and Well Written Essays - 1250 words”, n.d.)
The Dividend Received Deduction Term Paper Example | Topics and Well Written Essays - 1250 words. Retrieved from
(The Dividend Received Deduction Term Paper Example | Topics and Well Written Essays - 1250 Words)
The Dividend Received Deduction Term Paper Example | Topics and Well Written Essays - 1250 Words.
“The Dividend Received Deduction Term Paper Example | Topics and Well Written Essays - 1250 Words”, n.d.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF The Dividend Received Deduction


...? DIVIDEND POLICY Dividend is the payments that are given to the shareholders from the profits or reserves of a company. In the case of Associated British food company plc, the shareholders have experienced increasing dividends in the last four years. The management increased both the interim and final dividend throughout the four-year period. In 2007 the company paid an interim dividend of 6.5p which increased to 6.75p in 2008, 6.9p in 2009,7.6p in 2010 and finally 7.9p in 2011. For the case of the final dividend, the amount paid in 2008 was 13.5p, which was increased to 14.1p, 16.2p, 16.85p in 2009,200 and 2011 respectively (Associated...
3 Pages(750 words)Essay

Tax memorandum and dividend

.... Support At trial at the district court, the D’ Agostinos contended they did not owe any tax on the approximately $ 400,000 of diverted corporate funds. The income that Anne Marie diverted they argued was corporate income received by a shareholder that is taxable if it’s a constructive dividend payment, but it’s not taxable if it is a reduction by a shareholder’s loan account or capital account. The government contended that whether the diverted funds constitute personal income or corporate income depends upon the intent of the taxpayer at the time the funds are diverted. If the intent is to evade taxes, the income is personal and taxable. In this case, the government argued that whether diverted funds...
5 Pages(1250 words)Essay

Economics of Taxation

...proposals would change the way interest paid and received on debt and dividends received on equity are treated by our current income tax system. Consider the corporate income tax system first. How is interest paid on debt and dividends paid on equity currently treated in our corporate income tax system? How would they be treated under the Growth and Investment Tax Plan? Theoretically, how would you expect the new proposal to change the way firms issue debt and equity? Solution: Under the current corporate income tax system, interest paid on debt is deductible and dividends paid on equity are distributed from after-tax earnings of the...
4 Pages(1000 words)Essay

Dividend Policy

...Companies frequently re-examine their actions regarding the dividends to be paid to stockholders. Dividends are retained earnings paid to stockholders. Decisions regarding dividends are guided by the firm’s dividend policy. Dividend policy is influenced by the investment opportunities available to the firm. Stockholders have certain requirements that need to be taken into consideration in determining dividend policy or formulation of an appropriate dividend structure. Arriva is the one of the biggest names in the transport service business in the European market. Arriva’s balance sheet of last 5 years (from 2004-2008) is...
3 Pages(750 words)Essay

Deduction vs. Induction

...Deductive and inductive arguments form two es of argument that serve different purposes and come about in different contexts. A deductive argument is inherently stronger than an inductive argument for a couple of reasons. The first is that a deductive argument may be defined as an argument in which it is impossible for the premises to be true but the conclusion false. Accordingly, there is a necessary relationship and sufficient reason to go from premises to the conclusion of the argument. The conclusion of a deductive argument is treated as definitive. On the other hand, an inductive argument is an argument in which the premises are expected to support the conclusion...
2 Pages(500 words)Essay

Why companies pay dividend

...Why companies pay dividend? I. Introduction Dividends are defined as the income paid by investments and that both bonds and stocks can pay for it. (Tyson 2006, p. 215) When a firm declares and issues a dividend to its shareholders, this payment is not tax deductible and, instead, the receipt of it generally is considered to be taxable income to the shareholders.(Frenczy 2008, 8-21) These also underscore that since the firm that issued the dividends did not receive offsetting deduction, tax is paid both at corporate and individual levels as a consequence. Dividends are often compared with capital gains,...
6 Pages(1500 words)Essay

Dividend Policy

...Dividend Policy This February Apple has doled out this quarter’s dividends. However, Greenlight Capital, one of its shareholders, slapped the companywith a lawsuit, demanding a modification of such policy. This was the subject of the news article written by Brett Molina for USA Today. The news reported Apple’s response on the lawsuit, which was filed earlier. In the interest of clarity, the news included contents of the lawsuit – particularly, why it was lodged and what it was asking – and how Apple addressed the issue. Greenlight Capital’s position according to the report is that there should be higher dividends considering the amount of money available in the company. The news report...
2 Pages(500 words)Essay

Dividend and Non-Dividend Stock Valuation

...Dividend and Non-dividend Stock Valuation Introduction According to Peris the discount growth model is a technique that is used to value dividend stocks and covers gains in both capital and dividends. A capital gain indicates the appreciation of price on stock price while dividends provide a regular investment on income. The stocks that do pay dividends are more attractive and profitable for conservative investors. Merits of using dividend growth model First, the model is essential due to its simplicity in performing calculations. Once the variables of the model are known, calculating the share of stock is forthright....
2 Pages(500 words)Research Paper

Poverty Deduction

...Poverty Deduction Brief introduction to the policy problem It would not be a mistake to suggest that living in society should be regarded as an irreplaceable prerequisite for the development of the inner potential of a human being. Indeed, if it had not been for the presence of other people, a lot of abilities which are regarded as characteristic would not have evolved. Nevertheless, there might be situations when a part of the population is not able to prosper in the society and, quite the opposite, struggles to satisfy the most basic needs. Poverty is the phenomenon that comes to mind right away in this case. In spite of the fact that there is no social environment which does not feature poor people, the issue of...
5 Pages(1250 words)Essay

Dividend Policy

...(Hillier et al., 2011). However, as per the Modigiliani and Miller (M&M) model, the dividend policy of an organization has negligible or no effect on the shareholder’s wealth because the firm value is independent of its dividend policy. Moreover, in accounting process the dividend paid or received is calculated in cash flow which is very important for calculating the enterprise value through discounted cash flow method (Brooks and Mukherjee, 2013). Policy Structure of Tesco Plc Tesco Plc is one of the largest retailers globally. It is a British multinational, founded in 1919 and is headquartered in England. The company has paid an interim dividend of...
10 Pages(2500 words)Essay
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Term Paper on topic The Dividend Received Deduction for FREE!

Contact Us