Question

Bank holding companies and financial holding companies generally do not pay income tax because:

a. they are always chartered as non-profit corporations.
b. most of their income is subsidiary paid dividends, of which 80% is tax-exempt.
c. the subsidiaries always operate at a net loss.
d. bank holding companies must carry deposit insurance.
e. bank holding companies are not subject to Internal Revenue Service regulations.

Answer 1

Bank holding companies and financial holding companies generally do not pay income tax because most of their income is tax-exempt dividends and their subsidiaries usually operate at a net loss.

Step-by-step explanation:

Bank holding companies and financial holding companies generally do not pay income tax because most of their income is subsidiary paid dividends, of which 80% is tax-exempt. The subsidiaries of these holding companies often operate at a net loss, which reduces their taxable income. It is important to note that these companies are not chartered as non-profit corporations, but their tax-exempt dividends and net operating losses contribute to their tax savings.