Question

Cash payments made to investors (except for extremely high earners) from which of the following investments are subject to the lower 15% maximum tax rate?

I. Common stocksII. Preferred stocksIII. Convertible bondsIV. Non-convertible bonds

Answer 1

II. Preferred Stocks

Step-by-step explanation:

Preferred Stocks are those stocks who have preferential rights with respect to principal repayment and dividend payments over common stocks but are devoid of voting rights.

Often, higher dividend is paid on preferred stock than on common stock.

Generally, dividend paid on preferred stock falls under the category of ordinary dividend.

Except for investors of higher tax bracket, preferred stock holders are subject to a lower 15% maximum tax rate.