Question

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.

Homework Answers

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.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
a. The portion of income taxes expense that is deferred to future tax returns is credited...
a. The portion of income taxes expense that is deferred to future tax returns is credited to a noncurrent asset account entitled Deferred Income Taxes TRUE OR FALSE b. A corporation, like a partnership, must file a corporate income tax return and pay tax on its earnings TRUE OR FALSE c. For an individual taxpayer, the federal income tax rate on ordinary income is at least as high as the rate on capital gains TRUE OR FALSE D. Deferred tax...
1) Interest from tax exempt municipal bonds is an example of a temporary difference which will...
1) Interest from tax exempt municipal bonds is an example of a temporary difference which will result in a deferred tax liability. (answer True or False) 2) Warranty expense accrued on the income statement but not yet deducted on the tax report is an example of a temporary difference which will give rise to a deferred tax asset. (answer True or False) 3) Income tax payable is computed by multiplying taxable income by the current tax rate. (answer True or...
Taxpayers may elect to deduct state and local sales taxes  instead  of deducting state and local income taxes....
Taxpayers may elect to deduct state and local sales taxes  instead  of deducting state and local income taxes. True False The taxable income levels in the married filing jointly tax rate schedule are ________ those in the married filing separately schedule. double the same as half the amount of none of the choices are correct To qualify for the earned income credit, the taxpayer must have a qualified dependent. True False QUESTION 42 Which of the following is a true statement? The...
a) How can issuers of bonds protect themselves against unpredicted drops in the interest rate? b)...
a) How can issuers of bonds protect themselves against unpredicted drops in the interest rate? b) How can buyers of bonds protect the future payments they have been promised? c) What is a callable bond? Who gains from a call option? In what situation? What can we say about the prices and yields of two identical
16) Yest Corporation's bonds have a 15-year maturity, a 7% semiannual coupon, and a par value...
16) Yest Corporation's bonds have a 15-year maturity, a 7% semiannual coupon, and a par value of $1,000. The going interest rate (rd) is 6%, based on semiannual compounding. What is the bond’s price? Question 16 options: $1,008.65 $1,051.34 $1,024.67 $1,098.00 $1,105.78 17) Bond rating is a measure of interest rate risk Question 17 options: True False 18) The fisher effect expresses the relationship between coupon rate and yield. Question 18 options: True False 19) Stockholders have voting rights, and...
10. The prices of high-coupon bonds tend to be less sensitive to a given Change in...
10. The prices of high-coupon bonds tend to be less sensitive to a given Change in interest rates than low-coupon bonds, other things held constant. (Chapter 7)(8 points) a. True b. False
(I) Prices of shorter-maturity bonds respond more dramatically to changes in interest rates. (II) Prices and...
(I) Prices of shorter-maturity bonds respond more dramatically to changes in interest rates. (II) Prices and returns for long-term bonds are more volatile than those for short-term bonds. A. (I) is true, (II) is false B. (I) is false, (II) is true C. Both are true D. Both are false
Last year, Bill paid $4,000 in investment interest on funds borrowed to purchase tax-free municipal bonds....
Last year, Bill paid $4,000 in investment interest on funds borrowed to purchase tax-free municipal bonds. If he had $6,000 of tax-exempt interest last year, how much of his investment interest may he deduct on his federal income tax return
Why do companies that file consolidated tax returns often choose to allocate tax expense to the...
Why do companies that file consolidated tax returns often choose to allocate tax expense to the individual affiliates?
Investment expenses are the taxpayer's allowed deductions directly connected with the production of investment income. With...
Investment expenses are the taxpayer's allowed deductions directly connected with the production of investment income. With regards to the Tax Cuts and Jobs Act, investment expenses that a taxpayer can deduct on his or her California income tax return for tax year 2018 include all of the following except: Investment interest expense Depreciation allowed on assets that produce investment income Depletion allowed on assets that produce investment income Software or online services used to manage the taxpayer's investments
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT