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from what little information I have been able to gather it excludes REIT's. The Corporation must have paid taxes on the Dividends.

To be specific: Would the dividends a privately held C Corporation might pay in 2003 (for which the Corporation has previously paid Federal and State Taxes) qualify for the lower rate taxation for the shareholders of the Corporation?


There is no "qualifying domestic corporation". Dividends paid by domestic corporations are generally qualifying dividends for the reduced tax rate.

The exceptions (based on the source of the dividend) are (if I read the legislative language correctly): dividends from corporations which are exempt from income tax under IRC sections 501 or 521, dividends which are deductible under section 591 (mutual banks), any dividend described in section 404(k), dividends from RICs and REITs (which are subject to the limitations of sections 854 and 857).

Of the above cited sections: 404 addresses employer contributions to an ESOP or annuity plan or deferred compensation plan. 501 describes the types of tax-exempt corporations. 521 describes tax-exempt farmers cooperatives.

Hope this helps some. You might want to ask the corporation's accountant for an opinion to confirm.

Ira

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