Question

If individual taxpayers are the shareholders of PST Corporation and PST corporation is a shareholder of MNO Corporation, how many levels of tax is MNO's pre-tax income potentially exposed to:____________

Answer 1

triple taxation

Step-by-step explanation:

MNO's pretax income can be taxed up to three times:

1. First, MNO will have to pay corporate taxes on any income it makes.
2. Second, if MNO distributes dividends to PST Corporation, then PST will also have to pay income taxes on the dividends. Although the dividends received deduction lowers the tax amount, it still has to pay some taxes unless it owns more than 80% of MNO.
3. Third, if PST distributes dividends to its shareholders, then they will pay income taxes.

Answer 2

Answer:Triple taxation

Step-by-step explanation:

Triple taxation is a possibility when one corporation (the "Parent") owns stock in a second corporation (the "Subsidiary"). In such circumstances, income of the Subsidiary is potentially taxed a total of three times. ... But, a system aimed at achieving double taxation need not impose triple taxation.