Which of the following statements is most correct? a. Because taxes on long-term capital gains are not paid until the gain is realized, investors must pay the top individual tax rate on that gain. b. Retained earnings, as reported on the balance sheet, represents the amount of cash a company has available to pay out as dividends to shareholders. c. 70% of the dividends received by corporations is excluded from taxable income. d. 70% of the interest received by corporations is excluded from taxable income. e. The corporate tax system favors equity financing, as dividends paid are deductible from corporate taxes.

In simple words, the dividends that are received by the corporations are considered to be tax deductible to avoid the common issue of double taxation of corporate incomes.

Such investments are considered to be return from investments and some jurisdictions even allow majority share holding in the investing asset also. Through default 70 per cent of distributions earned from companies hold 20 per cent or fewer are exempt. This will otherwise be better.