Which of the Following Statements About the Tax Shield Benefits

question 12

Multiple Choice

Which of the following statements about the tax shield benefits from the Capital Cost Allowance(CCA) is correct?

• A) If the lessee's tax rate is less than the lessor's tax rate, then the tax shield benefits from CCA would be more valuable to the lessee than to the lessor
• B) If the lessee's tax rate is less than the lessor's tax rate, then the tax shield benefits from CCA would be more valuable to the lessor than to the lessee
• C) The tax shield benefits from CCA affect neither the lessee nor the lessor
• D) The tax shield benefits from CCA would be equally valuable to the lessee and the lessor

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Definitions:

Unlimited Liability

A legal obligation where business owners and partners are personally responsible for all debts and liabilities of the business.

Societies Act

Legislation that governs the registration and management of not-for-profit corporations or societies in certain jurisdictions.

Partnership Exists

A legal relationship formed when two or more persons carry on a business in common with the aim of profit.

Profit Split

A financial arrangement where profits are divided among participants, typically in a business venture or partnership.