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13 November, 12:10

Carr Corp. declared a 7% stock dividend on its common stock. The dividend:

a. Is includable in the gross income of the recipient taxpayers in the year of receipt.

b. Must be registered with the SEC pursuant to the Securities Act of 1933.

c. Has no effect on Carr's earnings and profits for federal income tax purposes.

d. Requires a vote of Carr's stockholders.

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  1. 13 November, 14:26
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    C) has no effect on Carr's earnings and profits for federal income tax purposes.

    Explanation:

    A stock dividend means that the corporation issues its existing shareholders more stock.

    In essence, the corporation is merely diluting the proportional ownership interest of existing shares.

    This has no effect on the corporation's earnings and profits for federal income tax purposes.

    Therefore, the dividend has no effect on Carr's earnings and profits for federal income tax purposes.
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