Question

What is the significance of a constructive dividend? n for O A. A constructive dividend is a dividend that is given some other label by the parties. For example a dividend maybe we compensation such amounts we rec ed e ndis for Thu compensation would be disabled payment were rected as added O B. A constructive dividend is a distribution by a regulated investment company realized from the sale of investments. Such dividendo ho include any underbated capital and located to shareholders by such.com OC. Constructive dividends are distributions to shareholders that are table as dividends only to the extent they are made from other the corporation's current earnings and profits or accured earnings and profits Distributions in excess of current and accumulated earnings and profits we treated as a table recovery of capital Distributions in excess of the basis of stock we classified as ordinary income D. A constructive dividend is a dividend that is given some other label by the parties. The only type of constructive ends are payments involving shareholderemployee compensato corporation deduct dividend paid to shareholders, but is permited to deduct reasonable compensation

Answer 1

Solution: Constructive dividends are distributions to shareholders that are taxable as dividends only to the extent they are made from either the​ corporation's current earnings and profits or accumulated earnings and profits. Distributions in excess of current and accumulated earnings and profits are treated as a taxable recovery of capital. Distributions in excess of the basis of stock are classified as ordinary income

Explanation: The constructive dividends for the shareholders would be taxable as ordinary income. But unlike the compensation, a dividend payment would not be subject to payroll taxes