Which one of the following statements related to corporate dividends is correct?
A) Dividends are nontaxable income to shareholders.
B) Dividends reduce the taxable income of the corporation.
C) The chief executive officer of a corporation is responsible for declaring dividends.
D) The chief financial officer of a corporation determines the amount of dividend to be paid.
E) Corporate shareholders may receive a tax break on a portion of their dividend income.

Question

Quizplus · Accepted Answer

Under certain circumstances, corporate shareholders may receive a tax break on a portion of their dividend income. The amount of the tax break, known as the "dividend received deduction," varies depending on the type of corporation and the amount of ownership in the corporation. The other statements are incorrect - dividends are taxable income to shareholders, dividends do not reduce the taxable income of the corporation, the declaration of dividends is typically made by the board of directors, and the CFO may participate in determining the amount of dividend but is not solely responsible for it.

Which One of the Following Statements Related to Corporate Dividends