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Background Note
| HBS Case Collection
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2009
(Revised from original 1999 version)
Debt v. Equity: Definitions and Consequences
by
Henry B. Reiling and Mark Pollard
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Abstract
Explores the location of the somewhat imprecise line between debt and equity. Identifies the primary business contexts that give rise to problems, the alternative tax consequences attending the debt versus equity determination, and the most prominent tests used to resolve the questions. Deals with corporate debt paying a market rate of interest and issued at par or close to it.
Keywords: Borrowing and Debt;
Equity;
Interest Rates;
Taxation;
Business and Government Relations;
Public Administration Industry;