8. The tax system Understanding taxes 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? Equity financing Debt financing You bought 1,000 shares of Tund Corp. stock for $60.59 per share and sold it for $82.35 per share after a few years. How will your gain or loss be treated when you file your taxes? As a capital gain taxed at the long-term tax rate O As a capital gain taxed at the current ordinary-income tax rate taxable income. It Depreciation expenses directly affect a company's taxable income. An increase in depreciation expense will lead to a will tax deducted from a company's earnings, thus leading to a operating cash flow. According to a tax law established in 1969, taxpayers must pay the of the Alternative Minimum Tax (AMT) or regular tax. To offset taxable income in a given year, ordinary corporate operating losses can be: Carried back for 5 years and carried forward for 10 years Carried forward indefinitely