Which of the Following Statements Is Most Correct

question 53

Multiple Choice

Which of the following statements is most correct?

• A) "New-stock" dividend reinvestment plans are similar to stock dividends because they both increase the number of shares outstanding but don't change the total equity of a firm.
• B) Investors receiving stock dividends must pay taxes on the new shares at the time the stock dividends are received.
• C) Stockholders pay no income tax on dividends reinvested in a dividend reinvestment plan.
• D) Both statements a and b are correct.
• E) None of the statements above is correct.

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Definitions:

Incorporated

Incorporated refers to the process of forming a corporation, which is a legal entity that is distinct from its owners, providing them with limited liability.

Appropriate State

A legal or suitable condition or status that a subject or entity is in, according to laws or regulations.

Certificate Of Incorporation

An official document issued by a government authority that establishes a corporation's legal existence.

Corporate Charter

A legal document establishing a corporation and outlining its structure, governance, and purpose, issued by a governmental authority.