Tom and Bob Are Equal Shareholders of a Profitable Company

question 8

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:

Centration

A cognitive development term referring to the tendency of children in the preoperational stage to focus on one aspect of a situation while neglecting others.

Piagetian Error

Mistakes made by children that reflect their stage of cognitive development, according to the theories of Jean Piaget; for example, misunderstanding conservation of quantity.

Object Permanence

The understanding that objects continue to exist even when they cannot be observed.

Focus on Appearance

The act of prioritizing or overly emphasizing the way one looks or presents themselves, often influenced by societal standards and perceptions.