Question

Johnny has invested in 10 shares of a big name electronics company. Each share is worth $150.28, and the company pays Johnny $2.13 for each share that he owns. With his 10 shares he earns $21.30 per year. What is this type of earning called? A) capital gain B) dividend income C) interest income D) adjusted gross income

Answer 1

The answer is b because I had the on USA test prep and got it wrong and it showed me the right answer which is dividend income

Answer 2

The correct answer is letter B: dividend income. It refers to the distribution of earnings made from companies to the share owners. The taxation of a dividend income is defined by a quality called "qualified dividend", meaning that it will be taxed at lower rates considering other sources of income. In order to be considered a "qualified dividend" it must have been paid by a US company and also the share owner must have owned it for more than 60 days during a 121-day period.