Which of the following is NOT a correct tax-planning reason why a corporate taxpayer would prefer to use debt securities rather than stock to finance corporate activities?

Group of answer choices

A. Dividends are taxed a second time when distributed to the corporation's shareholders. Also, the payment of dividends are not tax deductible by the corporation.

B. Repayment of principal on shareholder's loans is NOT a taxable event to the shareholder. Thus debt instruments for shareholder/creditors allow shareholders to distribute corporate earnings out of a C corporation when the corporation becomes profitable by retiring shareholder debt.

C. Using debt securities makes it easier to qualify the transfer of appreciated assets to the corporation as a tax-free exchange under IRC 351.

D. Interest expense on corporate debt is tax deductible to the corporation. Thus even if the interest is paid to a shareholder, the interest income is taxed only once at the shareholder level.

E. All of the above are correct reasons why a corporation would prefer to use debt securities rather than stock.