Nettie's Knits, Inc., paid taxes on its net income and then distributed part of the earnings as dividends to investors. These investors paid tax on the dividends they received. This practice is known as

Question

Quizplus · Accepted Answer

Double taxation occurs when a company pays taxes on its net income and then shareholders pay taxes on the dividends they receive from the company. This is because dividends are considered to be a distribution of the company's profits and are taxed as such.