"... the [MM] theorem is still taught and studied because it tells something very important. That is, capital structure matters precisely because one or more of these assumptions is violated. It tells where to look for determinants of optimal capital structure and how those factors might affect optimal capital structure"
"Miller and Modigliani (1963) and Miller (1977) addressed the issue more specifically, showing that under some conditions, the optimal capital structure can be complete debt finance due to the preferential treatment of debt relative to equity in a tax code. For example, in the U.S. interest payments on debt are excluded from corporate taxes. As a consequence, substituting debt for equity generates a surplus by reducing firm tax payments to the government."
"Miller and Modigliani (1963) and Miller (1977) addressed the issue more specifically, showing that under some conditions, the optimal capital structure can be complete debt finance due to the preferential treatment of debt relative to equity in a tax code. For example, in the U.S. interest payments on debt are excluded from corporate taxes. As a consequence, substituting debt for equity generates a surplus by reducing firm tax payments to the government."
http://www.econ.uiuc.edu/~avillami/course-files/PalgraveRev_...