Question

Which of the following is federally tax exempt for a corporation?

1) Preferred stock dividends.
2) Municipal bond interest.
3) Capital gains.
4) Foreign corporate stock dividends.

Answer 1

The federally tax exempt options for a corporation are preferred stock dividends, municipal bond interest, and capital gains. Foreign corporate stock dividends generally qualify for a 50% dividends received deduction.

Step-by-step explanation:

The federally tax exempt options for a corporation are preferred stock dividends, municipal bond interest, and capital gains. Foreign corporate stock dividends generally qualify for a 50% dividends received deduction.

The federally tax exempt options for a corporation are:

1. Preferred stock dividends: Dividends paid on preferred stock are generally taxable for corporations.
2. Municipal bond interest: Interest income earned from municipal bonds is generally exempt from federal income taxes.
3. Capital gains: Corporations are subject to federal income tax on capital gains, but there are provisions that allow for reduced rates.

Foreign corporate stock dividends: Dividends received by a corporation from a foreign corporation generally qualify for a 50% dividends received deduction.