Double taxation in a corporation is BEST described by which of the following?
A) Corporations must pay both provincial and federal taxes.
B) Corporations can double their earnings without higher taxes.
C) The corporation must pay taxes twice a year.
D) Earnings of the corporation and dividends of the shareholders both are taxed.

Question

Quizplus · Accepted Answer

Double taxation in a corporation means that the earnings of the corporation are taxed at the corporate level, and then the dividends paid to shareholders are also taxed at the individual shareholder level. This results in the same income being taxed twice. Option A is incorrect because it describes the regular taxes that corporations pay; option B is incorrect because it is not related to double taxation; and, option C is incorrect because the frequency of tax payment does not relate to double taxation.

Double Taxation in a Corporation Is BEST Described by Which