Double taxation refers to which of the following scenarios?
A)Both bondholders AND shareholders of a corporation must pay taxes on proceeds received.
B)The corporation pays taxes on its earnings,and creditors pay taxes on interest received.
C)The corporation pays taxes on its earnings,and shareholders pay taxes on dividends received.
D)All of the above

Question

Quizplus · Accepted Answer

Double taxation occurs when both the corporation and the shareholders are taxed on the same income. In this scenario, option C is correct as the corporation pays taxes on its earnings and then again shareholders pay taxes on the dividends received from those earnings. Option A is incorrect as bondholders are not taxed on the same income as shareholders. Option B is also incorrect because creditors do not pay taxes on the interest received, but rather the interest is considered taxable income for the corporation. Option D is incorrect because only option C describes double taxation.

Double Taxation Refers to Which of the Following Scenarios