Briefly explain the tax planning in relation to capital structure decisions (4 Marks) b) What are...

 

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Briefly explain the tax planning in relation to capital structure decisions (4 Marks) b) What are the considerations which should be observed while making manufacture or buy (4 Marks) decisions from a tax point of view? c) A domestic company possesses huge accumulated reserves. It wants do distribute dividends of KES. 100 Million to its equity shareholders. For this purpose it may issue 3 year 10% redeemable preference shares or 3 year 10% redeemable debentures. Keeping in view the following information suggest to the company whether it should issue bonus shares or bonus debentures so that the tax liability of the company and its shareholders is reduced: Assume Rate of tax on income of company and shareholder is 30% and Dividend Distribution (8 Marks) Tax is 5%. Briefly explain the tax planning in relation to capital structure decisions (4 Marks) b) What are the considerations which should be observed while making manufacture or buy (4 Marks) decisions from a tax point of view? c) A domestic company possesses huge accumulated reserves. It wants do distribute dividends of KES. 100 Million to its equity shareholders. For this purpose it may issue 3 year 10% redeemable preference shares or 3 year 10% redeemable debentures. Keeping in view the following information suggest to the company whether it should issue bonus shares or bonus debentures so that the tax liability of the company and its shareholders is reduced: Assume Rate of tax on income of company and shareholder is 30% and Dividend Distribution (8 Marks) Tax is 5%.

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1 Tax planning refers to the process of arranging a companys financial affairs in such a way that it minimizes the amount of taxes paid while still be... View the full answer