Which of the following is not a consequence of the double tax on dividends?
A) Corporations have an incentive to retain earnings and structure distributions to avoid dividend treatment.
B) Corporations have an incentive to invest in noncorporate rather than corporate businesses.
C) The cost of capital for corporate investments is increased.
D) Corporations have an incentive to finance operations with debt rather than equity.
E) All of these are consequences of the double tax on dividends.

Question

Quizplus · Accepted Answer

All the options listed (A, B, C, D) are indeed consequences of the double taxation on dividends. This double taxation occurs because corporate profits are taxed at the corporate level and then again at the individual level when distributed as dividends, leading to the incentives and behaviors described in the options.

Which of the Following Is Not a Consequence of the Double