Joe owns 500 shares of stock in the Megabux Corporation.He is pleased to learn that the company earned a very nice profit over the most recent operating period.The company has announced that they will pay each shareholder a dividend of $1 per share out of the after-tax profits.Because Megabux has already paid taxes on this profit,this payment will represent tax-free income to Joe.

Question

Quizplus · Accepted Answer

Dividends are typically considered taxable income to the shareholder, even if the corporation has already paid taxes on its profits.

Joe Owns 500 Shares of Stock in the Megabux Corporation