Ria owns 500 shares of stock in the Omnibux Corporation. She is pleased to learn that the company earned a very nice profit over the most recent operating period. The company has announced that it will pay each shareholder a dividend of $1 per share out of its aftertax profits. Because Omnibux has already paid taxes on this profit, this payment will represent taxfree income for Ria.

Question

Ria owns 500 shares of stock in the Omnibux Corporation. She is pleased to learn that the company earned a very nice profit over the most recent operating period. The company has announced that it will pay each shareholder a dividend of $1 per share out of its after­tax profits. Because Omnibux has already paid taxes on this profit, this payment will represent tax­free income for Ria.

Quizplus · Accepted Answer

Dividends received by shareholders are typically considered taxable income, even if the company has already paid taxes on its profits.

Ria Owns 500 Shares of Stock in the Omnibux Corporation