Assignment: Accounting

Assignment: Accounting

Answer (part a)

Double taxation is a principle, which imposes on income of the individuals that are paid twice on the same income earned. Usually corporations are dealing with this principle as they are considered as a separate legal entity from their stakeholders. The tax is calculated on the annual income, which is earned by the corporations, which is as simple as individuals do. When dividend is pay out by the corporations to the shareholders, there is an income tax liability included in the dividends for the shareholders who receive it. Although, the earnings, which is paid in the form of dividends to the shareholders, is already taxed at the corporate level.

Double taxation principle is a debatable topic. Some of the experts argue that this principle is unfair as their corporations already paid taxes on the earnings, which they get, and secondly they are the part of the corporation. While some other experts and investors say that double taxation, principle is a fair policy.

Earnings and profits are considered as it. Profits is that amount which company gets after selling its products less cost of that product and other costs which incurred in the selling of the products. The total profit, which company gets at the end of the year shows the performance of the company. From that profit, the company for its further expansion of the business retains a part of certain amount. The amount that is left after is distributed among the shareholders of the company.

In the United States, dividend taxation and capital gains tax is well described through double taxation term. Double taxes on dividends provide benefit to the government as they earn revenue. The main reason of imposing double taxation concept is to restricts the wealthy people and maintain a balance between upper and lower classes in the society. Because, if there is no tax on the dividends then every wealthy individual will invest in the stock market and will get more rich and this will cause in making the difference among the social classes.

Warren buffet does not think in paying out payments of dividend. He has a little unlike sights on paying dividends. Individual is taxes, Warren buffet already pays taxes on all it earns and if it were to pay out dividends to you then it would be taxed over again. This double taxation really decreases the worth of the income that ...