Why might one group of investors prefer the corporate form, whereas another group of investors prefers the partnership form?
Answer to relevant QuestionsIf corporations face tax disadvantages relative to partnerships, why might we continue to observe the corporate form, especially for large public businesses? Suppose Congress was to increase the top personal tax rate, tp, to 45% from 35%. How would this affect the required pretax corporate return, R*c, calculated in the final line of Table 4.4? That is, recalculate the required ...A wealthy taxpayer is planning to start an Internet based business. The taxpayer expects to generate tax losses for at least the first 5 years of the business. The taxpayer also hopes to cash out of the business within 10 ...List five assets that bear positive implicit taxes. Carefully explain why each asset bears an implicit tax (that is, how is the asset tax favored?). If the before tax rate of return on a riskless fully taxable bond is 7% and the before tax rate of return on a riskless tax favored asset is 5%, what is the implicit tax rate on the tax favored asset? If a tax exempt ...
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