true or false: within federal tax law, a bias for corporate issuers exists in favor of debt as compared to equity when f...
true or false: within federal tax law, a bias for corporate issuers exists in favor of debt as compared to equity when financing the operations of a corporation
Homework Answers
True
Reason:-
When operations are financed by debt, then interest paid is deductible and hence tax liability decreases.
However, when operations are financed by equity, no deduction is given for distribution of dividend.
This shows biasness in tax law in favor of debt in contrast to equity.
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