If a Corporation Cannot Use Its Interest Payments to Get

question 64

Multiple Choice

If a corporation cannot use its interest payments to get tax shield for a particular year because it has suffered a loss, it is still possible to get the tax shield because of the:
I. carry back provision that allows corporations to carry back the loss and receive a tax refund up to the amount of taxes paid in the previous two years.
II. carry forward provision that allows corporations to carry forward the loss and use it to shield income in subsequent years.

• A) I only
• B) II only
• C) I and II
• D) none of the above

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Definitions:

Private Banks

Financial institutions that are owned by private individuals or corporations instead of being owned by the government, offering banking services to individuals and businesses.

Depositors

Individuals or entities that hold accounts with banks or financial institutions, entrusting their funds for safekeeping and earning interest.

Money Market Mutual Fund Account

An investment account that pools money from individuals to invest in short-term, high-quality securities, often offering liquidity and low risk.

Interest-Earning Assets

Financial assets that generate income over time through the payment of interest, such as bonds, savings accounts, and certificates of deposit.