When considering personal taxes (but ignoring imputation):
A)effectively,the marginal tax rate on share income is greater than on debt income.
B)the tax deductibility of interest could never be fully offset by the tax differential on income to debtholders and shareholders.
C)the benefit of the tax deductibility of interest may be offset by the fact that investors need to be compensated for the higher personal tax on income to debtholders than shareholders.
D)tax paid on company income is zero.

Question

Quizplus · Accepted Answer

The benefit of the tax deductibility of interest may be offset by the higher personal tax rates on interest income compared to dividend income, requiring compensation for investors.

When Considering Personal Taxes (But Ignoring Imputation)