Which of the following statements is NOT correct?A.One cannot tax both the company and the shareholder for the same profit.B.Companies had paid 30% tax before distributing their dividends.C.The tax already paid by the company will offset the shareholder taxes that are due.D.The shareholder needs to include the dividend after tax into his or her taxable income.
Question
Which of the following statements is NOT correct?A.One cannot tax both the company and the shareholder for the same profit.B.Companies had paid 30% tax before distributing their dividends.C.The tax already paid by the company will offset the shareholder taxes that are due.D.The shareholder needs to include the dividend after tax into his or her taxable income.
Solution
The statement that is NOT correct is D. "The shareholder needs to include the dividend after tax into his or her taxable income."
This is incorrect because dividends that are received by shareholders are typically not included in their taxable income if the dividends have already been taxed at the corporate level. This is known as the dividend received deduction, which is designed to mitigate the effects of double taxation.
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