Double taxation of corporate income results because dividend distributions are included in a shareholder’s gross income, but are not deductible by the corporation. True False
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- Dividends are not taxable because these earnings have already been taxed to the corporation.Corporations are not without certain disadvantages. Most corporations are taxable entities, and their income is subject to taxation. This "income tax" is problematic as it oftentimes produces double taxation. This effect occurs when shareholders receive cash dividends that they must include in their own calculation of taxable income. O True FalseDividends Tax is a tax on the shareholder and it will not form part of the entities tax expense Select one: O True O False
- Why would a corporation purchase the stock of another corporation? a. To prevent double taxation of its shareholders b. Because dividends received by a corporation are partially tax-exempt c. It is equivalent to a tax carried forward d. It is equivalent to a tax carried backA corporation may not deduct dividends paid to shareholders but is permitted to deduct reasonable compensation? True or FalseDividends received by a domestic corporation from shares in another domestic corporation are exempt from income tax. Group of answer choices True False
- What does double taxation of corporate income mean? Could income ever be subject to tripletaxation? Explain your answer.Which of the following statements regarding constructive dividends is not correct? a. Constructive dividends do not need to be formally declared or designated as a dividend b. Constructive dividends need not be paid pro rata to the shareholders. c. Corporate shareholders that receive constructive dividends may not use the dividends received deduction. d. Constructive dividends are taxable as dividendsIs it possible for shareholders to defer or avoid the second level of tax on corporate income altogether? Briefly explain.
- Corporate taxable income is based on an income statement that is similar to income statements prepared for financial reporting. It has Revenues less expenses equals income. How is the computation for personal taxable income different from this income statement concept? Why do you think these differences exist?Corporate dividends represent: Multiple Choice tax-free income for the recipient because they are distributions of pretax income. tax-free income for the recipient because they are distributions of aftertax income. pretax income from the corporation which becomes taxable income for the recipient. taxable income for both the corporation and the shareholder, whether or not dividends are paid to shareholders. aftertax income from the corporation which becomes taxable income for the recipient. SubnThe accumulated earnings tax, which is imposed on corporations for the accumulation of earnings in excess of reasonable business needs, does not apply to: a. Closely-held corporations. b. Widely-held corporations. c. Corporations subject to the personal holding company tax. d. Both "Widely-held corporations" and "Corporations subject to the personal holding company tax". e. All of these choices are correct.