Double taxation of corporate earnings

Question

Quizplus · Accepted Answer

Double taxation of corporate earnings is a disadvantage for corporations and their shareholders, as they have to pay taxes at the corporate level and again on their individual income tax returns when receiving dividends. This can result in a lower return on investment compared to other financial assets that are not subject to double taxation. Therefore, choice B is correct as it implies that stockholders may need to earn higher returns to offset the tax disadvantage. Choices A, C, and D are incorrect as they either provide incorrect information or are not relevant to double taxation.

Double Taxation of Corporate Earnings