e effect of financial distress and taxation on gearing? A. Both constrain gearing B. The tax constrains gearing; financial distress pushes for increased gearing C. The tax pushes for increased gearing; financial distress constrains gearing D. Both push for increased gearing

e effect of financial distress and taxation on gearing? A. Both constrain gearing B. The tax constrains gearing; financial distress pushes for increased gearing C. The tax pushes for increased gearing; financial distress constrains gearing D. Both push for increased gearing

Income Tax Fundamentals 2020

38th Edition

ISBN:9780357391129

Author:WHITTENBURG

Publisher:WHITTENBURG

Chapter12: Tax Administration And Tax Planning

Section: Chapter Questions

Problem 12P

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Question

What is the effect of financial distress and taxation on gearing?

Both constrain gearing

The tax constrains gearing; financial distress pushes for increased gearing

The tax pushes for increased gearing; financial distress constrains gearing

Both push for increased gearing

Rules by which an authority (usually a government) imposes a financial obligation on individuals or organizations within its domain. Property or transactions can be taxed. While taxes are primarily intended to fund the operation of a government, many tax laws are created to encourage or discourage certain behaviors by citizens or companies.

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