The fact that 70% of the interest income received by a corporation is excluded from its taxable income encourages firms to use more debt financing than they would in the absence of this tax law provision.

Question

Quizplus · Accepted Answer

The exclusion of 70% of interest income from taxable income encourages firms to invest in other corporations' stocks rather than using debt financing, as it makes dividend income more attractive.

The Fact That 70% of the Interest Income Received by a Corporation