From a Tax-Paying Investor's Point of View, a Stock Repurchase

question 103

Multiple Choice

From a tax-paying investor's point of view, a stock repurchase:

• A) Is equivalent to a cash dividend.
• B) Is more desirable than a cash dividend.
• C) Has the same tax effects as a cash dividend.
• D) Is more highly taxed than a cash dividend.
• E) Creates a tax liability even if investors do not sell any of the shares they own.

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Definitions:

Superego

The superego is a component of Sigmund Freud's psychoanalytic theory representing the internalized moral standards and ideals that we acquire from both parents and society; it strives to act in a socially appropriate manner.

Sigmund Freud

An Austrian neurologist and the founder of psychoanalysis, a method for treating psychopathology through dialogue between a patient and a psychoanalyst.

Dorsal Frontal Cortex

A region of the brain's frontal lobes associated with executive functions such as planning, reasoning, and impulse control.

Ventral Frontal Cortex

A part of the frontal lobe in the human brain, associated with risk management, emotion, and complex social processes.