Corporate dividends are paid out of after-tax income and are therefore taxed at the personal level, even though they are paid from after-tax income. This means that individuals receiving dividends must pay taxes on them as part of their personal income tax.

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Corporate Dividends

Question 38

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: