A tax loopholes encourages corporations that are lightly taxed or not taxable due to losses or tax shelters to issue Blank______. Multiple choice question. preferred stock convertible bonds floating-rate bonds retractable bonds

A tax loopholes encourages corporations that are lightly taxed or not taxable due to losses or tax shelters to issue Blank______. Multiple choice question. preferred stock convertible bonds floating-rate bonds retractable bonds

Income Tax Fundamentals 2020

38th Edition

ISBN:9780357391129

Author:WHITTENBURG

Publisher:WHITTENBURG

Chapter4: Additional Income And The Qualified Business Income Deduction

Section: Chapter Questions

Problem 18MCQ

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Question

A tax loopholes encourages corporations that are lightly taxed or not taxable due to losses or tax shelters to issue Blank______.

Multiple choice question.

preferred stock

convertible bonds

floating-rate bonds

retractable bonds

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1) A corporation may choose to use debt financing because a) it has an income tax advantage. b) it typically has a higher cost of capital than equity. c) it carries voting rights. d) it reduces financial leverage. 2. The effective rate of interest on bonds a) is the interest rate specified on the bond certificate. b) is the market rate of interest when the bonds are actually sold. c) is the market rate of interest on the date of public announcement. d) none of these choices.
Which of the following statements concerning bonds is FALSE? A. Bonds can be issued either at par, premium, or discount. B. Bonds interest is tax deductible. C. Bondholders have voting rights. D. Bonds are usually considered to be a long term liability.
Most bonds: Select the correct response: give bondholders a voice in the affairs of the corporation are interest-bearing obligations of governments or corporations are floating-rate securities are money market securities
Identify the following as either an advantage or a disadvantage of bond financing for a company. a. Bonds do not affect owner control. b. A company earns a lower return with borrowed funds than it pays in interest. c. A company earns a higher return with borrowed funds than it pays in interest. d. Bonds require payment of periodic interest. e. Interest on bonds is tax deductible. f. Bonds require payment of par value at maturity.
True (t) or False (f) _____ Debt investments are investments in government and corporation bonds
Match the following terms to their correct definition
Revenue bonds, compared with general obligation bonds, generally A.) Are paid out of property or sales tax revenues. B.) Bear lower interest rates. C.) Are subject to the same debt limitations. D.) Are not backed by the full faith and credit of the issuing government.
Which of the following is a disadvantage to a corporation issuing bonds? Group of answer choices A)The required interest payment must be met each period. B)The liquid nature of the bonds makes them attractive to investors who may not want to hold them to maturity. c)The large principal payment due at maturity. d)Both the first and third answers above are both disadvantages. e)The first, second and third answers above are all disadvantages.
Bonds that pay no interest unless the issuing company is profitable are called Select one: O a. income bonds. O b. collateral trust bonds. Oc revenue bonds. O d. debenture bonds.
2. Which statement is not correct? a) Municipal bonds tend to have a lower yield than Treasuries b) Municipal bonds tend to have a lower rating than Treasuries c) Municipal bonds are "risk free" securities d) Municipal bonds are an interesting investment from a tax perspective
When corporations issue bonds, there are two distinct obligations. What are those obligations? What do the following terms mean in regard to corporations issuing bonds: convertible, callable, and debenture?
Identify the following as either an advantage (A) or a disadvantage (D) of bond financing for a company. Bonds do not affect owner control.