Why are dividends from a mutual insurer not subject to taxation?

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Why are dividends from a mutual insurer not subject to taxation?

A) Because insurance premiums are tax-deductible
B) Because dividends are already subject to capital gains
C) Because dividends are payable directly to the policyholder
D) Because dividends are considered to be a return of premium

Answer: D) Because dividends are considered to be a return of premium

Basic Principles

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