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issuers of coupon bonds are not allowed to deduct the interest expense on their tax returns....

issuers of coupon bonds are not allowed to deduct the interest expense on their tax returns. true or false.

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Answer #1

The given statement is False.

The tax advantage of issuing bonds instead of stock results from the interest paid by the company being a deductible expense on its federal and state income tax returns.

For e.g, suppose if a company issues $1000,000 of bonds with an interest rate of 7%, its annual interest expense will be $70,000. When the $70,000 of interest expense is entered on the company's income tax return, then its taxable income will decrease by $70,000.

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