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Suppose that, in an effort to reduce the federal deficit, Congress increases the top personal rate on interest and dividends to 35% but retains a 15% tax rate on realized capital gains. The corporate tax stays at 35%. Compute the total corporate plus personal rates paid on debt versus equity income if (a) all capital gains are realized immediately and (b) capital gains are deferred forever. Assume capital gains are half of equity income.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91418922

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