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Question
Current tax laws have which of the following effects?
a. Favor dividends because there are no capital gains taxes on dividends.
b. Do not favor capital gains because the tax must be paid as the value of the stock increases, whether or not the stock is sold.
c. Favor capital gains because the tax does not have to be paid until the stock is sold.
d. Do not favor dividends or capital gains for most people because different people are in different tax brackets.
e. Favor dividends since dividends are tax-deductible for the paying corporation whereas retained earnings, which produce capital gains, are not tax-deductible.
Answer
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