Question 802 negative gearing, leverage, capital structure, no explanation
Which of the following statements about ‘negative gearing’ is NOT correct?
(a) Negative gearing provides benefits by increasing the investor’s personal pre-tax income in the current year.
(b) Negative gearing works best when the investor has a high personal income so he’s in a high personal marginal income tax bracket.
(c) Negative gearing works best when the asset makes large capital gains but has low income (such as rent).
(d) The more leverage, the bigger the interest tax shield benefit of negative gearing.
(e) Real estate and shares can be negatively geared.