Final answer:
Structuring a stock redemption as a sale offers the advantages of deferral of gain recognition and decreased tax liability. The correct answer is D. Both A and B. Understanding capital gains and potential dividends is crucial when evaluating the present discounted value of an investment.
Step-by-step explanation:
The question is about the tax implications of structuring a stock redemption as a sale. Structuring a stock redemption as a sale can offer several tax advantages. One of these is the deferral of gain recognition, where the gain on the sale of the stock may not be recognized immediately for tax purposes. The other is a potentially decreased tax liability, which can occur if the sale is structured in a way that qualifies for lower capital gains tax rates, rather than the higher rates that might apply to dividends or ordinary income. To summarize, the correct answer to the question is D. Both A and B, these being deferral of gain recognition and decreased tax liability respectively.
When discussing the present discounted value of an investment like a stock or a bond, one should consider the potential capital gains from the future sale of the stock and any dividends that may be paid out. This is part of evaluating what an individual is willing to pay in the present for a future stream of benefits. A capital gain occurs when the increase in the stock's value is realized through a sale at a price higher than the original purchase price.