Corporate dividends are paid out of after-tax income, but they are still subject to personal income tax when received by individual investors. This means that they are taxed at the personal level, even though they have already been taxed at the corporate level.

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Corporate Dividends

Question 39

Multiple Choice

Corporate dividends

A) are a source of tax-free income for individual investors.
B) reduce the taxable income of the payer.
C) are only 70 percent taxable to corporate shareholders.
D) are paid out of pretax income and thus are taxed at the personal level.
E) are taxed at the personal level even though they are paid from after-tax income.

Correct Answer: