How does the federal income tax structure impacts a business finance decision with the use of debt vs. equity?

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Originally Posted by kmello05

How does the federal income tax structure impacts a business finance decision with the use of debt vs. equity?

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Interest on debt is deductible. If debt to capital ratio is considered to high by irs guidleines, usually more than 3:1, then debt is converted to capital and no deduction for interest is allowed.

Agreed!