What is an excess dividend? (RE&CF 4) Dividends that liquidate retained earnings Dividends that exceed investor expectations Dividends that terminate ownership Dividends that result in additional tax consequences
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- Profits that have been subjected to IAET will be liable to dividend tax when they are eventually declared as dividends. Is it true or false?If profits are eventually issued as dividends, IAET-subject profits are liable to income tax. False or Truewhich one is correct please confirm? QUESTION 17 Several regulations limit dividend payments. Which of the following do not limit dividend payments? a. Net earnings restriction b. Liability restriction c. Capital impairment restriction d. Restrictive covenants
- Would would an investor prefer to receive a distribution as a dividend? Answers: Lower tax rate on dividends than capital gains Higher tax rate on dividends than capital gains Greater certainity Greater uncertainitywhich one is correct answer please confirm? QUESTION 19 Several regulations limit dividend payments. Which of the following do not limit dividend payments? a. Liability restriction b. Capital impairment restriction c. Restrictive covenants d. Net earnings restrictionExplain the relationship between dividends and earnings and profits. (pick one answer) Question content area bottom Part 1 A. Distributions are always nontaxable to shareholders. Distributions in excess of earnings and profits are treated as a nontaxable addition to capital. Distributions in excess of the basis of the stock are treated as capital gain. B. Distributions are taxable to shareholders as dividends only to the extent they are made from either current or accumulated earnings and profits. Distributions in excess of earnings and profits are treated as a nontaxable recovery of capital. Distributions in excess of the basis of the stock are treated as capital gain. C. Distributions are taxable to shareholders as dividends only to the extent they are made from current earnings and profits. Distributions in excess of earnings and profits are treated as a taxable recovery of capital. Such distributions increase the shareholder's basis in the…
- Why the dividend does exceeds the balance in retained earnings, the excess referred to as a liquidating dividend?What are interest received and dividends received in accounting (tax)? Also, please describe ordinary vs. qualified dividends and preferential rate for qualified dividends? (with some examples)What do an appropriation of accumulated profits and a declaration of a cash dividend have in common? * a. Both increase the amount of appropriated accumulated profits b. Both result in a decrease in unappropriated accumulated profits c. Both have the same consequences for shareholders d. Both permanently reduce future ability to pay dividends
- Why capital gains may be tax-advantage and how to interpret the t(interest)=t(dividend) but t(dividends)>t(capital gains) and hence t(interest)>t(capital gains)?Would would an investor prefer to receive a distribution as a repurchase (capital gain)? Answers: Lower tax rate on dividends than capital gains Higher tax rate on dividends than capital gains Greater certainity Greater uncertainityWhy are preferred dividends deducted from net income when calculating EPS? Are there circumstances when this deduction is not made?
