10. The tax system Provisions of the U.S. Tax Code for Corporations and Individuals From a corporation's point of view, does the tax treatment of dividends and interest paid favor the use of debt financing or equity financing? O Debt financing Equity financing Which of the following cash outflows cannot be deducted from the operating income to derive the corporation's taxable income? O Dividends paid O Interest paid Cute Camel Woodcraft Company owns 103,500 shares in the Lazy Zebra Furniture. If Lazy Zebra has 150,000 shares of common stock outstanding, can Cute Camel file a single income tax return that reports the incomes and expenses of both companies? O No, because Cute Camel Woodcraft Company's ownership stake in Lazy Zebra is less than or equal to 79%, whereas 80% or more is required by the U.S. Tax Code. Yes, because Cute Camel Woodcraft Company's ownership stake in Lazy Zebra is greater than or equal to 80%, as required by the U.S. Tax Code. No, because Cute Camel Woodcraft Company's ownership stake in Lazy Zebra is less than or equal to 40%, whereas 50% or more is required by the U.S. Tax Code. The Internal Revenue Service prohibits the improper of dividends, which refers to a corporation's retention of undistributed profits to assist shareholders in avoiding their personal income tax on dividends. The IRS imposes a penalty if corporations accumulate more than Suppose you want to invest $10,000. You have two options: Option #1: Invest in municipal bonds with an expected return of 13.00%, or Option #2: Invest in the corporate bonds of Jefferson & Alexander Inc. which are offering an expected return of 17.55% Tax Code. O No, because Cute Camel Woodcraft Company's ownership stake in Lazy Zebra is less than or equal to 40%, whereas 50% or more is required by the U.S. Tax Code. The Internal Revenue Service prohibits the improper of dividends, which refers to a corporation's retention of undistributed profits to assist shareholders in avoiding their personal income tax on dividends. The IRS imposes a penalty if corporations accumulate more than Suppose you want to invest $10,000. You have two options: Option #1: Invest in municipal bonds with an expected return of 13.00%, or Option #2: Invest in the corporate bonds of Jefferson & Alexander Inc. which are offering an expected return of 17.55% Assume that your decision is based solely on your tax situation. If everything else is the same for both bonds, at what tax rate would you be indifferent between these two bond investments? O 28.52% 24.11% 25.93% O 33.19% For your personal portfolio, you purchased 1,000 shares of a foreign manufacturing company for $39.00 per share and sold it for $62.00 per share after 18 months. How will your gain or loss be treated when you file your taxes? O As a capital gain that will be taxed at the current ordinary income tax rate As a capital gain that will be taxed at the capital gains tax rate Grade It Now Grade It Now Save & Continue Save & Continue Continue without saving 10. The tax system Provisions of the U.S. Tax Code for Corporations and Individuals From a corporation's point of view, does the tax treatment of dividends and interest paid favor the use of debt financing or equity financing? O Debt financing Equity financing Which of the following cash outflows cannot be deducted from the operating income to derive the corporation's taxable income? O Dividends paid O Interest paid Cute Camel Woodcraft Company owns 103,500 shares in the Lazy Zebra Furniture. If Lazy Zebra has 150,000 shares of common stock outstanding, can Cute Camel file a single income tax return that reports the incomes and expenses of both companies? O No, because Cute Camel Woodcraft Company's ownership stake in Lazy Zebra is less than or equal to 79%, whereas 80% or more is required by the U.S. Tax Code. Yes, because Cute Camel Woodcraft Company's ownership stake in Lazy Zebra is greater than or equal to 80%, as required by the U.S. Tax Code. No, because Cute Camel Woodcraft Company's ownership stake in Lazy Zebra is less than or equal to 40%, whereas 50% or more is required by the U.S. Tax Code. The Internal Revenue Service prohibits the improper of dividends, which refers to a corporation's retention of undistributed profits to assist shareholders in avoiding their personal income tax on dividends. The IRS imposes a penalty if corporations accumulate more than Suppose you want to invest $10,000. You have two options: Option #1: Invest in municipal bonds with an expected return of 13.00%, or Option #2: Invest in the corporate bonds of Jefferson & Alexander Inc. which are offering an expected return of 17.55% Tax Code. O No, because Cute Camel Woodcraft Company's ownership stake in Lazy Zebra is less than or equal to 40%, whereas 50% or more is required by the U.S. Tax Code. The Internal Revenue Service prohibits the improper of dividends, which refers to a corporation's retention of undistributed profits to assist shareholders in avoiding their personal income tax on dividends. The IRS imposes a penalty if corporations accumulate more than Suppose you want to invest $10,000. You have two options: Option #1: Invest in municipal bonds with an expected return of 13.00%, or Option #2: Invest in the corporate bonds of Jefferson & Alexander Inc. which are offering an expected return of 17.55% Assume that your decision is based solely on your tax situation. If everything else is the same for both bonds, at what tax rate would you be indifferent between these two bond investments? O 28.52% 24.11% 25.93% O 33.19% For your personal portfolio, you purchased 1,000 shares of a foreign manufacturing company for $39.00 per share and sold it for $62.00 per share after 18 months. How will your gain or loss be treated when you file your taxes? O As a capital gain that will be taxed at the current ordinary income tax rate As a capital gain that will be taxed at the capital gains tax rate Grade It Now Grade It Now Save & Continue Save & Continue Continue without saving