Dividend Payments That Are the Result of Liquidation of Assets

question 60

Multiple Choice

Dividend payments that are the result of liquidation of assets are known as ________ and are taxed as capital gains.

• A)return of capital
• B)rolling dividends
• C)alternate payments
• D)private earnings
• E)special dividends

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Definitions:

Book Income

The income reported by a company in its financial statements, differing from taxable income due to various adjustments.

Life Insurance Premiums

Regular payments made to an insurance company to maintain a life insurance policy.

Permanent Difference

Items that cause a difference between the tax base of assets or liabilities and their carrying amount in financial statements, affecting taxable income or taxes payable.

Deferred Tax Asset

An accounting term for items that will reduce future tax payments, such as carryover losses or credits.