What is the dividend received deduction?

A dividend is a sum of money paid by a company to its shareholders from their profits. A deduction is a subtraction by tax in this particular case. A Dividends-Received Deduction is a tax reduction given to the company that receives a dividend from another company for which it has ownership in. If a company receives dividends from another company it is entitled to a deduction of 70 percent of the dividends that it receives. However, if the receiving company owns 20 percent or more then the deduction is 80 percent.