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Purpose of Dividend Received Deduction

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Please help with the given questions:

1. What is the purpose of the dividend received deduction? What corporations are entitled to claim this deduction? What dividends qualify for this deduction?

2. What is the purpose of the reconciliation of taxable income with book income?

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Solution Summary

The solution examines the purpose of dividend received deductions. The corporations entitled to claim this deduction and the dividends that qualify for this deduction is determined. Additionally, this solution includes one reference source for further investigation of the topic.

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A tax deduction received by a corporation on the dividends paid to it by companies in which it has an ownership stake. The purpose of this deduction is to soften the consequences of triple taxation. Triple taxation occurs because the company paying the dividend does so with after-tax money and the receiving company is subject to income tax on the dividends. Therefore, if the company that receives the dividends decides to pay out its shareholders, the money ...

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