Chartered Retirement Planning Counselor (CRPC) Practice Exam 2025 – Comprehensive All-in-One Guide for Exam Success!

Question: 1 / 660

What happens to employer plan dividends when they are distributed in cash?

They are ignored in tax calculations

They reduce the employer's taxable income

When employer plan dividends are distributed in cash, they increase the employer's tax obligations. This is because the dividends, once distributed, are considered an income for the employer. Consequently, they must report these amounts as part of their taxable income. Therefore, the distribution does not provide a tax benefit that would reduce taxable income; rather, it adds to the income and may result in higher taxes owed.

Proper understanding of tax implications for dividends emphasizes that they are treated as ordinary income when distributed. This is crucial for financial planning, as it influences both the employer's and employees' tax situations.

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They increase the employer's tax obligations

They are subject to a flat tax rate

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