If a local Firm X owns 35% of the shares of a Canadian-owned Firm Y,and Y pays dividends to all of its shareholders,what percentage of the dividends received by X can be exempted from its taxable income?

Question

Quizplus · Accepted Answer

Under Canadian tax law, dividends received by a Canadian corporation from another Canadian corporation are generally eligible for a Dividend Received Deduction (DRD), which can make these dividends effectively tax-exempt. This is to avoid double taxation of income. Since Firm X is local (implying it is Canadian) and Firm Y is Canadian-owned, the dividends received by X from Y would be eligible for this deduction, making 100% of the dividends received exempt from taxable income.

If a Local Firm X Owns 35% of the Shares