
QUESTION 45
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Suppose you are in the 33% income tax bracket. You own shares in Carefree Casinos, whose profits are taxed at a 25% rate. “Double
taxation ” means:Carefree pays 25% tax on before-tax profits, then another 25% tax is applied to its after-tax profits.
Carefree pays 25% tax on its before-tax profits, then another 33% tax is applied to its after-tax profits.
Carefree pays 25% tax on before-tax profit and 33% on its
retained earnings , and you pay 33% tax on dividends which are distributed to you.Carefree pays 25% tax on before-tax profit but 0 tax on its retained earnings, and you pay 33% tax on dividends which are distributed to you.
Carefree pays 25% tax on before-tax profit and 25% on its retained earnings, and you pay 33% tax on dividends which are distributed to you.

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