### Question
What is the definition of dividend equivalent amount?


### Answer
The definition of **dividend equivalent amount** is as follows in *26 U.S.C. § 884*:

> the foreign corporation's effectively connected earnings and profits for the taxable year adjusted as provided in this subsection:



#### (1) Reduction for increase in U.S. net equity


If—



(A) the U.S. net equity of the foreign corporation as of the close of the taxable year, exceeds



(B) the U.S. net equity of the foreign corporation as of the close of the preceding taxable year,


  

the effectively connected earnings and profits for the taxable year shall be reduced (but not below zero) by the amount of such excess

#### Citation:
  - *26 U.S.C. § 884*
  - Heading: **Subtitle A-Income Taxes > CHAPTER 1-NORMAL TAXES AND SURTAXES > Subchapter N-Tax Based on Income From Sources Within or Without the United States > PART II-NONRESIDENT ALIENS AND FOREIGN CORPORATIONS > Subpart B-Foreign Corporations**

