Which One of the Following Statements Is Correct Concerning the Taxation

question 68

Multiple Choice

Which one of the following statements is correct concerning the taxation of dividends and capital gains?

• A)Seventy percent of capital gains derived from stock investments are tax exempt for corporate investors.
• B)Dividends are a form of tax-exempt income for individual investors.
• C)All investors are subject to the same tax rate on dividend income.
• D)Individual investors can defer taxation on both dividends and capital gains.
• E)As of 2015, individual investors pay a tax rate that varies from 0 to 15 percent on dividend income.

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Definitions:

Operating Leverage

Refers to the extent to which fixed costs are used in a company's operations; high operating leverage means a larger proportion of fixed costs, leading to greater potential for profit variability with changes in sales volume.

Pretax Net Income

The amount of income that a company has earned before any taxes have been deducted.

CVP Analysis

Cost-Volume-Profit Analysis, a financial tool used to determine how changes in cost and volume affect a company's operating income and net income.

Pre-Tax Net Income

The income earned by a business before the deduction of tax expenses.