A characteristic of franked dividends that differentiates them from unfranked dividends is:
A)franked dividends carry tax credits related to the income tax paid by the company.
B)the gross amount of dividends paid is different.
C)franked dividends are indexed for inflation,while unfranked dividends are not.
D)the amount of payment received by the shareholder from the company.

Question

Quizplus · Accepted Answer

Franked dividends carry tax credits related to the income tax paid by the company, whereas unfranked dividends do not. This means that the shareholder receiving a franked dividend can use the tax credit to offset their own income tax liability, reducing their overall tax obligation. Because of this tax benefit, franked dividends are generally considered more attractive to investors than unfranked dividends. The gross amount of dividends paid and the amount of payment received by the shareholder are the same for both types of dividends. Inflation indexing is not a characteristic of franked or unfranked dividends.

A Characteristic of Franked Dividends That Differentiates Them from Unfranked