Preferred Stock Has Both a Tax Advantage and a Tax

question 12

Multiple Choice

Preferred stock has both a tax advantage and a tax disadvantage. Those two are:

• A) in default there are no taxes and dividends are taxed in corporate hands at 70%.
• B) corporate dividend receipts are taxed on 30% of the total dividends and a liability is created for arrears.
• C) dividends are not a tax-deductible expense but are 70% exempt from corporate taxation.
• D) dividends are fully tax deductible but are not equity capital.

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The practice of managing international relations through negotiations and dialogue between countries.

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A legislative body formed by elected representatives of the people, responsible for making laws and decisions in a democratic government.