Asked by seydi ortiz on May 07, 2024
Verified
What is double taxation?
A) It is when two separate tax authorities tax the same corporation.
B) It is a situation that only affects sole proprietorships.
C) It occurs when the business owner pays himself or herself a salary.
D) It occurs when earnings are taxed once at the corporate level and then taxed a second time as personal income.
Double Taxation
The imposition of taxes on the same income, asset, or financial transaction at two different levels, such as corporate profits and then again when dividends are distributed to shareholders.
Corporate Level
Corporate level refers to the highest tier of management and operations within a diversified or multi-business company, focusing on issues affecting the company as a whole.
Personal Income
The total annual income received by an individual from all sources before taxes.
- Gain insight into the fundamentals and merits of corporate creation, such as reduced liability and fiscal impacts.
Verified Answer
JM
Josie Myatt [Student]May 10, 2024
Final Answer :
D
Explanation :
Double taxation occurs when a corporation's earnings are first taxed at the corporate level and then taxed again as personal income when distributed to shareholders or owners. This does not affect sole proprietorships because they are not separate legal entities from their owners. Paying oneself a salary does not necessarily result in double taxation.
Learning Objectives
- Gain insight into the fundamentals and merits of corporate creation, such as reduced liability and fiscal impacts.