Question

Which of the statement(s) is correct? i. Corporations rarely pay tax on the interest income. ii. Higher tax bracket people tend to buy municipal bond because it is federal tax exempt. iii. Short term capital gain and long-term capital gain are treated differently for individuals. iv. The corporate tax rates in the U.S. is one of the lowest among the developed nations. 6 A. i only B. ii only C. ii and iii D. iii and iv E. All the statements are correct

Answer 1

Answer:

E. All the statements are correct

Explanation:

i. Corporations rarely pay tax on the interest income.

This statement is correct. Some companies do not even pay any income taxes.

ii. Higher tax bracket people tend to buy municipal bond because it is federal tax exempt.

Correct, people who have high incomes, and are subject to a high federal income tax rate often buy municipal bonds because these bonds are exempt from federal income tax.

iii. Short term capital gain and long-term capital gain are treated differently for individuals.

Correct. Short-term capital gains are those obtained from the sale of property that was owned for less than one year. This gains are often treated with the highest tax rate.

Long-term capital gains are those obtained from the sale of property that was owned for more than one year, and are treated with more favorable tax rates.

iv. The corporate tax rates in the U.S. is one of the lowest among the developed nations.

This statement is correct. The corporate tax rate in the U.S. is a nominal 21% (the effective rate can be as low as 0% for some companies). This is one of the lowest rates among developed nations, whose rates hover around 25 to 30% on average.