Which of the Following Statements Best Describes the Priority of the Tax

question 68

Multiple Choice

Which of the following statements best describes the priority of the tax treatment of a distribution from a corporation to a shareholder?

• A) The distribution is a return of capital, then gain from sale of stock, and finally a dividend to the extent of the corporation's earnings and profits.
• B) The distribution is a return of capital, then a dividend to the extent of the corporation's earnings and profits, and finally gain from sale of stock.
• C) The shareholder can elect to treat the distribution as either a dividend to the extent of the corporation's earnings and profits or a return of capital, followed by gain from sale of stock.
• D) The distribution is a dividend to the extent of the corporation's earnings and profits, then a return of capital, and finally gain from sale of stock.

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Definitions:

Total Revenue

The overall amount of money generated by a firm from its sales activities before any costs or expenses are deducted.

Unit Price

The cost per unit of quantity of a product, which allows for easy comparison of cost efficiency between different products or services.

Demand Elastic

Refers to how sensitive the quantity demanded of a good is to a change in its price.

Demand Schedule

A chart displaying the amount of a product or service buyers are prepared and capable of buying at different price levels.