[6] S corporations are not eligible for a dividends received deduction, as they are considered a pass-through entity, which taxes the shareholders.
Second, if the dividends received deduction increases or creates a net operating loss, the limitation does not apply.
Per §246(c)(1)(A), a dividends received deduction is denied under §243 with respect to any share of stock that is held by the taxpayer for 45 days or less.
Code Section 246A disallows the benefit of the dividends received deduction for debt financed purchases of corporate portfolio stock.
As stated by the Joint Committee on Taxation, the provision reduces the deduction for dividends received on debt-financed portfolio stock.