The dividend exclusion for corporations receiving dividends from another corpora

Question

The dividend exclusion for corporations receiving dividends from another corporation has resulted in stock investments being relatively less attractive, relative to bond Investments made by one corporation in another corporation. stock investments being relatively more attractive relative to bond investments made by one corporation in another corporation. a lower cost of equity for the corporation paying the dividend. a higher relative cost of bond-financing for the corporation paying the dividend.

Explanation / Answer

The dividend exclusion for corporations receiving dividends from another corporation has resulted in stock investments being relatively more attractive relative to bond investments made by one corporation in another corporation. This is because corporate stockholders can deduct the dividends received from the taxable income from the investment made in stock of the other corporations. Corporate can deduct 70% of the dividends received if the corporate have less then 20% stock of the other corporation. It can deduct 75% if the investment is between 20% to 79%. and when the stake is 80% or more it can deduct 100% of the dividends received.

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