With regard to debt and equity securities, which of the following statements is correct? (Assume the corporations are not in the business of lending money.)
A)A premium on an equity issue has a tax impact on the issuing corporation.
B)A discount on an equity issue has a tax impact on the issuing corporation.
C)A premium on a debt security is taxed in the hands of an issuing corporation.
D)A discount on a debt security is fully or 50% deductible for tax purposes, depending on the discount rate.

Question

Quizplus · Accepted Answer

A discount on a debt security is fully or 50% deductible for tax purposes, depending on the discount rate. Premiums on debt securities are not taxed in the hands of the issuing corporation. Choices A and B are incorrect as they refer to equity securities, which have different tax implications than debt securities. Choice C is incorrect as premiums on debt securities are not taxed in the hands of the issuing corporation.

With Regard to Debt and Equity Securities, Which of the Following