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:

Federalism

A system of government where power is divided among a central authority and constituent territorial units.

Sovereignty

Sovereignty is the supreme power or authority of a state to govern itself or another state, free from external control.

Constitutionally Divided

A term referring to the separation of powers among the different branches of government as defined by a constitution.

Implied

Something suggested or indicated, though not expressly stated.