Which of the Following Statements Is FALSE

question 33

Multiple Choice

Which of the following statements is FALSE?

• A) Unlike with capital structure, taxes are not an important market imperfection that influence a firm's decision to pay dividends or repurchase shares.
• B) If dividends are taxed at a higher rate than capital gains, which has been true until the most recent change to the tax code, shareholders will prefer share repurchases to dividends.
• C) Shareholders typically must pay taxes on the dividends they receive. They must also pay capital gains taxes when they sell their shares.
• D) But because long-term investors can defer the capital gains tax until they sell, there is still a tax advantage for share repurchases over dividends.

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Definitions:

RULPA

The Revised Uniform Limited Partnership Act, a set of laws adopted by some states to govern the formation, operation, and dissolution of limited partnerships.

Expiration of Term

The end of a period during which an agreement, contract, or tenure was supposed to last.

Insanity Ruling

A legal determination that a person was not responsible for their criminal actions at the time of the offense due to mental illness, affecting their capacity to understand right from wrong.

Operation of Law

Changes in legal rights or obligations that occur automatically due to established laws, rather than through the actions of individuals.