final notes

final notes - Corporate Tax Why support have a separate tax...

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Corporate Tax Why support have a separate tax – corporation tax? 1. Big company – many stockholder, management and owner diff – distinct entities. 2. Corporation receive special adv from society – limited liab, so tax = user fee i. Q - Why need to pay fee for a benefit? 3. Protect integrity (complete) of the personal income tax –avoid tax evasion i. If not tax – would put all earnings in the comp. to reduce his tax liab ii. Tax deferred are tax saved iii. Money retain in comp. growth at before tax rate. 1.Q – tax on comp is not the only way to include all earning Structure 1. Employee compensation and wages deducted, ng sai tax 2. Interest, but not dividends, is deducible i. If borrow – Interest expenses deductive ii. If issue stock – dividend include in tax income Encourage borrowing 3. Depreciation – deduct (Q. should dep how much?) 1.Lower after tax price ii. Dep allowance (tax saved)= tax rate x Depreciation amt / (1+r)^t Lower t -> greater value written off in 1 st yr Intangible asset – advertisement – expected to increase sales over a period of years 4. ITC – investment tax credit – can subtract some portion of purchase price of an asset from tax liab. Treatment of Dividend vs R/E Dividend not deductible – will tax both in corp tax and personal tax (double tax) Avoid in 2003 Law by max tax on dividend Tax result – increase $1 R/E, increase stock price, hv capital gain – not tax
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final notes - Corporate Tax Why support have a separate tax...

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