No. of Recommendations: 0
in addition to rubindj's excellent summary of the dividends received deduction for corporations, let me add one point.

There is a lot of case law (and IRS regs, as well) revolving around the issue of whether an instrument is "debt" or "equity". I won't go into the specifics here (Section 385 of the Code is the pertinent section, but there's a lot of subjectivity involved), but suffice to say that it is possible for a company to issue something they name "preferred stock", yet it could be treated as a debt issue and not get the preferential tax treatment accorded to "dividends".

So, don't be surprised to find little "wrinkles" in preferred stock to ensure that it gets treated as equity rather than debt.

Print the post  


When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.