Which of the Following Statements Regarding "Taxation of Dividends and Capital

question 13

Multiple Choice

Which of the following statements regarding "taxation of dividends and capital gains under current tax law" is incorrect (assuming that the marginal tax rate for a large corporation is 35%) ?

• A) For-profit corporations have a tax reason to prefer dividends.
• B) Corporations pay corporate income tax on only 30% of any dividends received.
• C) The effective tax rate on dividends received by large corporations is 35% of the marginal corporate tax rate.
• D) Corporations have to pay a 35% tax on the full amount of any realized capital gain.