In Order to Shift the Taxation of Dividend Income from a Parent

question 2154

Multiple Choice

In order to shift the taxation of dividend income from a parent to a child

• A) the parent must direct the corporation to pay the dividend to the child.
• B) the parent can deposit the dividend in the child's bank account.
• C) the parent must transfer ownership of the stock to the child.
• D) all of the above will result in shifting the taxation to the child.

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Definitions:

Preemptive Right

A shareholder's right to buy new shares in a company before they are offered to the public, to maintain their ownership percentage.

Voting Power

The right or authority to vote, often related to the number of votes someone controls in the decision-making process of an organization.

Dividends

Payments made by a corporation to its shareholder members. It is the portion of corporate profits paid out to stockholders.

Strike Suit

In corporation law, a derivative suit motivated primarily by an intent to gain an out-of-court settlement for the suing shareholder personally or to earn large attorney’s fees for lawyers, rather than to obtain a recovery for the corporation.