2013 (Taxation) Bar Exam Questions: Multiple Choice Question 2

[Discuss/answer the question below. Or see Taxation Instructions; Taxation Essay Questions: 12, 3, 4, 5, 6, 7, 8, 9, 10, 11 and 12; Taxation Multiple Choice Questions: 13, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19 and 20; See also 2013 Bar Exam: Information, Discussions, Tips, Questions and Results]

II.

MGC Corp. secured an income tax holiday for 5 years as a pioneer industry. On the fourth year of the tax holiday, MGC Corp. declared and paid cash dividends to its stockholders, all of whom are individuals.

Are the dividends taxable? (1%)

(A) The dividends are taxable; the tax exemption of MGC Corp. does not extend to its stockholders.

(B) The dividends are tax exempt because of MGC Corp.’s income tax holiday.

(C) The dividends are taxable if they exceed 50% of MGC Corp.’s retained earnings.

(D) The dividends are exempt if paid before the end of MGCCorp.’s fiscal year.

4 comments

Leave a Reply

Your email address will not be published. Required fields are marked *