How is the marginal tax rate affected by the presence of rules that reduce current tax deductions by a fraction of incremental income? How is the marginal tax rate affected by the presence of rules that postpone current tax deductions or tax credits by a fraction of incremental income?
Answer to relevant QuestionsWhat alternative investment and financing instruments can firms use to alter their marginal tax rate? Why might the firm prefer to repackage its capital structure (the mix of financial instruments it issues to finance ...Why might the taxing authority agree to provide advance rulings on the tax treatment of proposed transactions? Why might it refuse to make rulings in some cases? Consider the illustration in Section 7.3 where an investment choice was being made between taxable and tax-exempt bonds in the presence of tax-rate uncertainty and transaction costs. a. Would you prefer to invest in 3-year ...If an employee exercises an NQO early in advance of an expected tax-rate increase, what costs or benefits might accrue to the employer? When are discretionary bonus plans attractive tax-planning vehicles? What incentives might induce the employer to renege on the bonus? What prevents the employer from reneging?
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