The dividends received deduction (DRD) is available to C corporations with respect to dividends received from domestic corporations. The amount of the DRD is generally equal to 70% (for stock ownership of less than 20%) or 80% (for stock ownership of 20% or more but less than 80%) of the dividends received. A limitation applies if the applicable percentage (70% or 80%) of taxable income (computed without regard to the DRD, NOL deduction, domestic production activities deduction, and capital loss carryback) is less than the normal DRD amount. However, the taxable income limitation does not apply if the normal DRD amount creates or increases an NOL. (For stock ownership interests of 80% or more, the applicable DRD percentage is 100% and the taxable income limitation does not apply.)

Two additional limitations apply to the DRD. First, no DRD is allowed unless the corporation has held the stock for more than 45 days. Second, the amount of the DRD is reduced by the percentage of the investment in the stock that is debt financed. This reduction in the DRD cannot exceed that amount of the interest expense deduction allocable to the dividend.

True or False?