Which of the Following Statements Regarding Constructive Dividends Is Not

question 41

Multiple Choice

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) Corporations that receive constructive dividends may not use the dividends received deduction.
• D) Constructive dividends are taxable as dividends only to the extent of earnings and profits.
• E) All of the above.

---

Definitions:

Tax Treatment

The specific way tax laws are applied to an individual's, company's, or transaction's income, assets, or activities.

Long-term Incentive Pay

Compensation awarded to employees for achieving strategic objectives that contribute to the company's long-term performance.

Loan Loss Provision

An expense set aside as an allowance for uncollected loans and loan payments, reflecting anticipated losses in the loan portfolio.

Bad Debt Expense

An expense reported on the income statement, representing the portion of receivables that is estimated not to be collectible.