Which of the Following Statements Is True

question 78

Multiple Choice

Which of the following statements is true?

• A)Income character determines the tax year in which the income is taxed.
• B)Income character depends on the taxpayer's filing status.
• C)Qualified dividend income is taxed at a lower rate than the same amount of ordinary income.
• D)A taxpayer selling a capital asset at a gain recognizes ordinary incomE.Qualified dividends are taxed at a maximum rate of 15% or 20% (depending on the taxpayer's income) and are always taxed at a lower rate than the same amount of ordinary income would be.Income character determines the rate at which income is taxed and it does not depend on filing status.Finally, a taxpayer selling a capital asset at a gain recognizes capital gain not ordinary income.

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Definitions:

Net Present Value

The difference between the present value of cash inflows and the present value of cash outflows over a period, used in capital budgeting to assess the profitability of an investment.

Simple Rate

A basic form of interest calculation representing a percentage of the principal amount over a certain period of time.

Payback Period

The payback period is the duration of time it takes to recover the cost of an investment. This metric is commonly used to assess the feasibility or profitability of a project.

Straight-Line Method

A method of calculating depreciation or amortization that allocates evenly the cost of an asset over its useful life.