Preferred stock has both a tax advantage and a tax disadvantage.These two are:
A)in default there are no taxes and dividends are taxed in corporate hands at 70%.
B)corporate dividends are taxed on 30% of the dividends received and expenses are deductible.
C)dividends are not a tax-deductible expense but are 70% exempt from corporate taxation.
D)dividends are fully tax deductible but are not equity capital.
E)None of the above.

Question

Quizplus · Accepted Answer

Preferred stock dividends are not tax-deductible for the corporation, but 70% of the dividends received by a corporation from another corporation are exempt from taxation, providing a tax advantage.

Preferred Stock Has Both a Tax Advantage and a Tax