Dividends Received Deduction

When corporations are taxed on their dividends, the Internal Revenue Service (IRS) does it in two manners, once when they sell them to smaller corporations and once when they are distributed to shareholders. We sometimes wonder as to how Walmart, Lowes or even stores like Michael's are able to maintain such high level of inventory, make the sales and earn a profit. Sometimes we may wonder as to why they are making such a high profit, and the answer lies upon taxable deductions.

Examples of deductions are the DRD, as explained above, as well as deductions for several other items that accountants come across in the Profit Loss and Balance Sheet. Many of the expenses that are deductible are meals and entertainment but also bad debt.

Bad debt is a burden to the corporation that tries to operate in a manner that is sustainable and profitable but without funds coming into the organization, the company may go bankrupt or no longer have a going concern, which means that it has enough liquid assets to pay off debts itself as well as liabilities.

Corporations bring jobs to the public and they are part of the history of the United States, from Ford which built cars in amounts of less than one thousand dollars for sale as well as low capital which allowed the company to grow potentially in Detroit, Michigan. Other companies that are important to the American public are Honeywell which provides technology and General Mills, which produces nutritious meals throughout the history of the country and during the wars that the country has endured; also during periods of peace.

Corporations are a good thing, as they are straightforward entities that create jobs and profit to invest in the government, the military, peace at home, social care and energizing the country with new ideas to develop and continue to have the most advance economy in the world. While it may seem weird and crazy to think that break even situations are bad, they are acceptable, and corporations should aim for that if nothing else is foreseeable in the landscape. Profits are better, but no losses are also okay.

Finally, all business structures are important, and they all play a fundamental role in the economy, the environment where they operate and the public and the customers that they serve.