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:

Red Herring

A prospectus for the sale of a security not yet approved by the SEC. Stamped with the word preliminary in red letters.

Commerce Department

A department of the federal government dedicated to promoting economic growth, supporting business, and managing trade.

Maturity Matching

A financial strategy that involves matching the duration of assets and liabilities to mitigate risk.

Financing

The act of supplying capital for enterprise operations, acquisitions, or investment purposes.