Multiple Choice QuestionWhen a corporation pays a tax on its profits and individual stockholders each pay tax on dividends distributed by the corporation, it is called ______.Multiple choice question.double taxationa stock optionreturn taxessplitting the stock
Question
Multiple Choice QuestionWhen a corporation pays a tax on its profits and individual stockholders each pay tax on dividends distributed by the corporation, it is called ______.Multiple choice question.double taxationa stock optionreturn taxessplitting the stock
Solution
The correct answer is double taxation. This term refers to the situation where a corporation is taxed on its profits, and then the individual stockholders are also taxed on the dividends they receive from those profits. This is often seen as a disadvantage of corporations compared to other business structures, such as partnerships or sole proprietorships, where the profits are only taxed once.
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