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. This payment will represent tax-free income to Joe.

Question

Quizplus · Accepted Answer

Dividends paid to shareholders from a company's profits are typically considered taxable income for the recipient, not tax-free income.

Joe Owns 500 Shares of Stock in the Megabux Corporation