Because U. S. corporations are allowed to exclude from taxable income 70% of the dividends they receive from other U. S. corporations, it is sometimes suggested by tax planners that they should invest in dividend paying common or preferred stock. Is it tax advantageous for a U. S. corporation to buy dividend paying stock? Is it tax advantageous for a U. S. corporation to buy adjustable rate preferred stock (short term dividend paying preferred stock, with a dividend yield that floats in direct proportion to short term treasury yields) instead of dividend paying stock? Is it tax advantageous for a corporation to issue the preferred stock? Canadian firms can exclude 100% of the dividends they receive from other Canadian corporations. Is it tax advantageous for Canadian companies to buy common stock in other Canadian corporations?
Answer to relevant QuestionsAn established corporation currently pays out 50% of earnings as dividends. The CFO asks you whether it is tax advantageous for the corporation to pay dividends to shareholders other than corporations. How did the 1986 Tax ...True or False? Discuss. a. The implicit tax rate on an asset cannot be calculated without a benchmark asset against which to compare pretax returns. b. The implicit tax rate is always positive. c. The implicit tax rate is ...Risk differences among assets mask the effects of differential taxation on returns. If we know the required after tax risk premiums on assets, how can we determine the effects of differential taxation on their expected ...Calculate the implicit and explicit tax rates for the following three assets. The required pretax total rate of return Ro for each asset is 20% for both the fully taxable asset and the partially taxable asset and 8% for the ...Suppose you are a high tax bracket taxpayer. How could you take advantage of a situation in which the implicit tax rate on a tax exempt asset is different from the marginal tax rate on income from a fully taxable asset? How ...
Post your question