13. The tax system Aa Aa E Provisions of the U.S. Tax Code for Corporations and Individuals The applicable tax rate for S corporations is based on the: 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 Corporate tax rate Stockholders' individual tax rates Equity financing Debt financing O Fuzzy Button Clothing Company owns 300,000 shares in the Rainy Moose Shoe Company. If Rainy Moose has 400,000 shares of common stock outstanding, can Fuzzy Button file a single income tax return that reports the incomes and expenses of both companies? Yes, because Fuzzy Button's ownership stake is greater than or equal to 75.00%, as required by the U.S. Tax Code. No, because Fuzzy Button's ownership stake is less than the 100% ownership stake required by the U.S. Tax Code to file a consolidated return. O No, because Fuzzy Button's ownership stake does not exceed the 80% threshold required by the U.S. Tax Code to file a consolidated tax return. Assume that the tax rate on corporate taxable income up to $50,000 is 15%, and 25% for income levels between $50,001 and $75,000. If the Clumsy Chihuahua Music Company has a taxable income of $55,000, then it has a tax liability of and an average tax rate of Suppose you want to invest $10,000. You have two options: Option #1: Invest in municipal bonds with an expected return of 10.00%, or Option #2: Invest in the corporate bonds of Jefferson & Alexander Inc. which are offering an expected return of 14.50% 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? 0 28.83% 31.00% 34.10% 39.68% O For your personal portfolio, you purchased 1,000 shares of a foreign manufacturing company for $30.00 per share and sold it for $72.00 per share after 18 months. How will your gain or loss be treated when you file your taxes? 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 13. The tax system Aa Aa E Provisions of the U.S. Tax Code for Corporations and Individuals The applicable tax rate for S corporations is based on the: 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 Corporate tax rate Stockholders' individual tax rates Equity financing Debt financing O Fuzzy Button Clothing Company owns 300,000 shares in the Rainy Moose Shoe Company. If Rainy Moose has 400,000 shares of common stock outstanding, can Fuzzy Button file a single income tax return that reports the incomes and expenses of both companies? Yes, because Fuzzy Button's ownership stake is greater than or equal to 75.00%, as required by the U.S. Tax Code. No, because Fuzzy Button's ownership stake is less than the 100% ownership stake required by the U.S. Tax Code to file a consolidated return. O No, because Fuzzy Button's ownership stake does not exceed the 80% threshold required by the U.S. Tax Code to file a consolidated tax return. Assume that the tax rate on corporate taxable income up to $50,000 is 15%, and 25% for income levels between $50,001 and $75,000. If the Clumsy Chihuahua Music Company has a taxable income of $55,000, then it has a tax liability of and an average tax rate of Suppose you want to invest $10,000. You have two options: Option #1: Invest in municipal bonds with an expected return of 10.00%, or Option #2: Invest in the corporate bonds of Jefferson & Alexander Inc. which are offering an expected return of 14.50% 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? 0 28.83% 31.00% 34.10% 39.68% O For your personal portfolio, you purchased 1,000 shares of a foreign manufacturing company for $30.00 per share and sold it for $72.00 per share after 18 months. How will your gain or loss be treated when you file your taxes? 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