John Owns Stock in Green Corporation, Which, in Turn, Owns

question 100

Essay

John owns stock in Green Corporation, which, in turn, owns stock in IBM. When IBM earns income, it is subject to the corporate income tax (i.e., the first tax). When IBM pays a dividend, Green Corporation must pay a corporate income tax on its share (i.e., the second tax). When Green Corporation pays a dividend, John must pay an individual income tax on what he receives (i.e., the third tax). Thus, the same income is subject to triple taxation.
a.How does the tax law mitigate the tax on Green Corporation?
b.How does the tax law mitigate the tax imposed on John?

---

Definitions:

Impersonal Organization

Describes entities structured to operate without personal considerations, relying on standardized procedures and roles to achieve objectives.

Hierarchy

A system or organization in which people or groups are ranked one above the other according to status or authority.

Traditional

Adhering to or advocating for the preservation of established customs, ideas, or systems, usually in opposition to modern innovations or changes.

Procedures

Established ways of performing tasks or activities in organized settings, often following set rules or guidelines to achieve specific objectives.