CFA Practice Question

There are 131 practice questions for this study session.

CFA Practice Question

The federal income tax rules provide another reason for firms to ______ dividend payments.

A. avoid
B. accelerate
C. like
Correct Answer: A

Federal income tax rules would favor firms avoiding the payment of dividends. Investors could then sell stock to create "homemade" dividends. The tax consequences would be more favorable to the investors because of the lower capital gains tax rates.

User Contributed Comments 4

User Comment
ianrh Is this still true?
shawncol why not?
Bevin Capital gains are taxed at 15% and dividends are taxed at individual tax rate.
davidt87 also double taxation
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