Question

What is the process of double taxation for the shareholders of a corporation in a classical tax system?

Select one:

a. Their shares are taxed when they are both bought and sold.

b. The owners of a corporation are taxed when they get salaries and when they receive dividend payments.

c. The corporation must pay taxes on any profits it makes, and the capital raised by the sale of shares is also subject to taxation.

d. The corporation is taxed on the profits it makes, and the owners are taxed when this profit is distributed to them.

e. The owners of a corporation are taxed when they receive dividend payments and when they make a profit from the sale of shares.

Answer 1

Answer :- Option e). The owners of a corporation are taxed when they receive dividend payments and when they make a profit from the sale of shares.

Explanation :- At the time of receiving dividend payments as well as when earning profits from selling the shares, The owners of company need to pay the tax. So, taxation occurs twice for owners / shareholders of company. Therefore, Option (e) to the given question is correct answer and rest all other options to given question are incorrect.