If individual taxpayers are the shareholders of PST Corporation and PST Corporation is a shareholder of MNO Corporation, how many levels of tax is MNO's pretax income potentially exposed to?
A)One.
B)Two.
C)Three.
D)None.

Question

Quizplus · Accepted Answer

MNO Corporation's pretax income is potentially exposed to three levels of tax: first at the corporate level when MNO earns the income, second at the corporate level again when PST Corporation receives dividends from MNO (assuming no dividend received deduction applies or there are limitations to its application), and third at the individual level when PST Corporation distributes dividends to its individual shareholders.

If Individual Taxpayers Are the Shareholders of PST Corporation and PST