Tom and Bob Are Equal Shareholders of a Profitable Company

question 7

Multiple Choice

Tom and Bob are equal shareholders of a profitable company which earns only active business income. The company is growing and dividend payouts are increasing. The two men have heard that 'holding corporations' might suit their needs. Which of the following would apply if they each created a holding corporation, each of which owned 50% of the company?

• A) Dividends received by the holding corporations from the operating company must be invested in the same ventures.
• B)The holding corporations would receive the dividends from the operating company, free of tax, to be invested in Tom's and Bob's separate choices.
• C) The establishment of holding corporations would allow Tom and Bob to access the profits of the operating company for personal use without paying a second level of tax.
• D) Dividends would flow from the operating company to Tom and Bob, and then to the holding corporations.

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Definitions:

Synaptic Effectiveness

Synaptic effectiveness refers to the efficiency and strength with which a synapse can transmit a signal from one neuron to another.

Long-term Depression (LTD)

A reduction in the effectiveness of neuronal synapses lasting hours or longer following a long patterned stimulus, contributing to the inverse process of synaptic strengthening.

Synaptic Effectiveness

The ability of synapses (junctions between two neurons) to efficiently transmit signals from the presynaptic neuron to the postsynaptic neuron.

Electrical Stimulation

Passage of an electrical current from the uninsulated tip of an electrode through tissue, resulting in changes in the electrical activity of the tissue.