The existence of taxes can directly affect a common shareholder's preference for capital gains or dividend income.

Question

Quizplus · Accepted Answer

When taxes on capital gains are higher than taxes on dividends, shareholders may prefer to receive dividend income instead of capital gains to minimize their tax burden. Conversely, when taxes on dividends are higher than taxes on capital gains, shareholders may prefer to receive capital gains instead of dividend income.

The Existence of Taxes Can Directly Affect a Common Shareholder's