Final answer:
The Dividends Received Deduction (DRD) is limited when it would create or increase a net operating loss for a corporation to prevent tax benefits that do not reflect actual economic income. The correct answer is option a).
Step-by-step explanation:
When a corporation's Dividends Received Deduction (DRD) will create a net operating loss, the DRD is limited. The reason for this limitation is to prevent corporations from obtaining tax benefits that are disproportionate to their actual economic income. The dividends received deduction is generally available for corporations to avoid triple taxation on dividends: income is taxed at the corporate level when earned, again at the corporate level when distributed as a dividend, and finally at the shareholder level when received. However, if the DRD causes or increases a net operating loss, it must be adjusted to ensure that the loss is not artificially inflated by the DRD, which would otherwise lead to an excessive benefit.