If Both Dividends and Capital Gains Are Currently Taxed at the Same

question 13

Multiple Choice

If both dividends and capital gains are currently taxed at the same ordinary income tax rate, the effect of the tax is different because:

• A) capital gains are actually taxed, while dividends are taxed on paper only.
• B) dividends are actually taxed, while capital gains are taxed on paper only.
• C) dividends are taxable when distributed while capital gains are deferred until the stock is sold.
• D) capital gains are taxable when distributed while dividends are deferred until the stock is sold.

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Definitions:

Rational Decision Maker

An individual or entity that makes choices by systematically considering all available information and potential outcomes to maximize their benefit or utility.

Stimulus Package

A package of economic measures put together by a government to stimulate a floundering economy, typically through a combination of spending increases and tax reductions.

Economic Downturn

A period of negative growth in an economy, characterized by a decrease in the GDP, employment, and spending.

Inflation

The frequency at which the average pricing for goods and services uplifts, subsequently reducing the power of procurement.