Explain the rationale for disallowing the deduction for interest expense attributable to money borrowed to acquire tax-exempt municipal bonds
Municipal bond interest is excluded from gross income. A double benefit would result if the current rules did not exist. For example, a taxpayer in the 35% tax bracket could borrow funds at 7%, invest the money in municipal bonds at 5%, and realize a profit simply because the interest expense is deductible. The after-tax interest cost to a taxpayer in the 35% tax bracket is 4.55% [7% ? (1 - tax rate of .35)].
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As a company records depreciation expense for a period of time, a corresponding cash inflow from investingactivities is reported on the statement of cash flows
a. True b. False Indicate whether the statement is true or false
George is buying his first house. He has found two houses that he thinks he likes. He is highly involved in the purchase and knows that making the wrong choice could affect him for years to come. George will likely undertake ________
A) limited problem solving B) significant problem solving C) opinion leadership D) routine response problem solving E) norm-seeking behavior
Many off-balance-sheet financings fall into one of two categories that accounting typically does not recognize as liabilities: executory contracts and contingent obligations
Indicate whether the statement is true or false
Both common and preferred stock carry the same degree of investment risk for the stockholder
Indicate whether the statement is true or false