"Double Taxation" Means

question 65

Multiple Choice

"Double taxation" means:

• A) If stockholders decide to sell their shares, they are subject to paying twice the amount of taxes on any capital gains.
• B) As the owner of the company, you pay twice the amount in employment taxes on yourself, as you do on your employees.
• C) Corporations pay taxes on their profits. If they distribute after-tax profits to the stockholders, the stockholders also pay taxes on the distribution.
• D) If the corporation doubles its profits from the previous year, the firm's tax rate (the percentage it pays in taxes) will also double.

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Definitions:

Taxable Income

The portion of income that is subject to tax after all deductions and exemptions have been applied according to tax law.

Tax Liability

The total amount of tax that an individual or entity is legally obligated to pay to tax authorities.

Average Tax Rate

The portion of total taxable income that is paid in taxes, calculated by dividing the total tax amount by the total income.

Average Tax Rate

The ratio of total taxes paid to total taxable income, representing the percentage of income that goes towards taxes.