Corporate profits are taxed once as corporate profits with t

Corporate profits are taxed once as corporate profits with the tax paid by the corporations, and then profits distributed as dividends to individuals (stockholders) are taxed again as personal income. This demonstrates the concept of: (Multiple Choice)

a. Sales Tax

b. Static Tax Analysis

c. Dynamic Tax Analysis

d. Double Taxation:

Solution

DOUBLE TAXATION

Under Double taxation system the corporate profit are taxed at both corporate and personal level. Corporation must pay the tax at the corporate rate first then again any profits that is distributed to shareholders through dividends are subjected to personal income tax rate.