How To Calculate Deemed Dividend

Introduction & Importance

Deemed dividend is a tax concept where a portion of a corporation’s earnings is treated as if it were distributed to shareholders as a dividend, even if no actual dividend was paid. Understanding how to calculate deemed dividend is crucial for investors and tax professionals…

For more information, see the IRS guidelines on irs.gov and the Treasury Department’s explanation of treasury.gov.

What is the formula for calculating deemed dividend?

Deemed dividend is calculated as (Income – Standard Deduction) * Deemed Dividend Rate.