What Is "Double Taxation" in the Context of a Corporation

question 99

Multiple Choice

What is "double taxation" in the context of a corporation?

• A) Consumers are taxed twice, once when they purchase products and once when they receive dividend cheques.
• B) The federal government taxes corporate earnings at twice the rate of earnings of sole proprietors.
• C) Gross earnings are taxed, then net earnings.
• D) A corporation must pay income taxes on its profits, and then shareholders must also pay personal income taxes on the dividends they receive from the corporation.
• E) None of these explain double taxation.

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Definitions:

Risk Premium

The return in excess of the risk-free rate of return that investors demand for choosing a risky investment.

Small Companies

Businesses with relatively small market capitalization or revenues.

Average Returns

Refers to the mean financial return of an investment over a specified period, which includes dividends, interest, and capital gains.