What is double taxation of corporate income and can be triple taxed
belongs to book: FUNDAMENTALS OF FINANCIAL MANAGEMENT|Eugene F.Brigham, Joel F. Houston|12th Edition| Chapter number:3| Question number:9
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belongs to book: FUNDAMENTALS OF FINANCIAL MANAGEMENT|Eugene F.Brigham, Joel F. Houston|12th Edition| Chapter number:3| Question number:9
total answers (1)
Double taxation refers to the fact that corporate income is subject to an income tax, and then stockholders are subject to a further personal tax on dividends received. In fact, because of double taxation Congress was motivated to reduce the tax rate on dividends to the same rate (15%) as long-term capital gains (at least through 2012). However, the tax rate is scheduled to rise on January 1, 2013.
need an explanation for this answer? contact us directly to get an explanation for this answerIncome could even be subject to triple taxation. Triple taxation occurs when (1) the original corporation is first taxed, (2) the second corporation is then taxed on the dividends it received, and (3) the individuals who receive the final dividends are taxed again. Therefore, corporations that receive dividend income can exclude some of the dividends from its taxable income. This provision in the Tax Code minimizes the amount of triple taxation that would otherwise occur.