Alhambra Corporation, a U.S. corporation, receives a dividend from its 100 percent owned Spanish subsidiary.The dividend is eligible for the 100percent dividends received deduction. Any income taxes paid to a Spanish taxing authority will be creditable on the U.S. tax return.

Question

Quizplus · Accepted Answer

The 100% Dividends Received Deduction (DRD) applies to certain dividends from foreign corporations, but it does not allow for a foreign tax credit for the taxes paid to the foreign country on those dividends; instead, it allows the domestic corporation to exclude the dividend income from its taxable income.