What Is A Qualifying Dividend?
The DRD is only available for cash dividends or actual cash distributions treated as dividends (e.g., in the case of certain redemptions of stock). Distributions of other property are not eligible. Deemed dividends which may result from an investment by the CFC in U.S. property are not eligible. The Conference Committee report makes it clear that a distribution made by a CFC to its U.S. parent in a complete liquidation of the CFC, which is treated as a dividend under section 367(b) of the Internal Revenue Code (Code), is eligible for the DRD. Taxpayers might be tempted to avoid the trouble (and potential foreign tax consequences) of an actual distribution by filing a so-called “check-the-box” election to treat the CFC as if it had liquidated. However, the Conference Committee report indicates that in this case the shareholder would not be treated for purposes of the DRD as having received cash that is reinvested in the United States, as required by the Act. (It seems that Congress did
