Which of the Following Is an Example of the Income-Shifting

question 95

Multiple Choice

Which of the following is an example of the income-shifting strategy?

• A)A corporation paying its shareholders a $20,000 dividend.
• B)A corporation paying its owner a $20,000 salary.
• C)A high tax rate taxpayer investing in tax-exempt municipal bonds.
• D)A cash-basis business delaying billing its customers until after year-end.
• E)None of the choices are correct.

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Definitions:

Risk-Free Rate

The theoretical return on an investment with no risk of financial loss, typically associated with government bonds.

Risk-Free Asset

An investment that is expected to return its principal and interest without any loss or risk of default, typically represented by government bonds.

Strike Price

The Strike Price is the predetermined price at which the holder of an option can buy (in a call option) or sell (in a put option) the underlying asset.

Black-Scholes Option Pricing Model

A mathematical model used to price European call and put options by calculating the option's expected payoff at expiration.