Which of the following investors would prefer a low dividend payout for taxation reasons?
A) an elderly women on a modest fixed income
B) a doctor holding the security outside a registered pension plan
C) a law professor holding the security inside a registered retirement pension plan
D) an insurance company holding the security for investment purposes

Question

Quizplus · Accepted Answer

An investor holding the security outside a registered pension plan, such as a doctor, would prefer a low dividend payout for taxation reasons. This is because dividend income is taxed at a higher rate than capital gains if held outside of a tax-advantaged account. Therefore, a low dividend payout would result in lower taxes for the investor.

Which of the Following Investors Would Prefer a Low Dividend