and the Development of Tax Expertise
Urton Anderson, Garry Marchant, and John Robinson
The effect of instructional strategy on tax expertise was investigated
in an experimental setting. Fifty-eight introductory tax students
received instruction in a specific tax issue ("similar or
related in service or use" under I.R.C. Section 1033) using
three instructional strategies (cases, examples, and concepts).
Rule application and factor identification were used as measures
of performance. Two different variations of the "similar
or related" issue were investigated: the first variation
involved an atypical context and the second involved an increase
in ambiguity. Subjects in the examples treatment outperformed
those in the cases and concepts treatment in terms of rule application.
Overall, subjects in the cases and concepts treatments out- performed
those in the examples treatment in terms of factor identification.
Variation of scenarios between typical and atypical did not, in
general, affect factor identification, In an ambiguous situation
subjects in the concepts treatment outperformed subjects in the
cases and examples treatments. Although not attaining the level
of performance of subjects in the concepts treatment, subjects'
performance on factor identification for the cases treatment was
found to improve when prior problems were based on atypical rather
than typical contexts. These results imply that instructional
strategy and variation in context during learning influence the
transfer of tax knowledge.
The Effect of Value-Added Tax
Collection Alternatives on Revenue Yield
Robert P. Crum and Bruce H. Lubich
A value-added tax (VAT) has attracted increasing attention from
tax policy makers and tax analysts in their search for revenue
sources. Using macro data, we estimate the revenue that each of
24 VAT forms would have generated from the nonfinancial corporate
sector during 1971-85. Analyses of these estimates: (1) demonstrate
that revenue generation substantially depends upon VAT form, (2)
reconcile with the micro results of Crum 11 985), (3) suggest
that the invoice (accrual) method may speed recession recoveries
by reducing cash outflows for companies immediately before economic
troughs, (4) indicate that a VAT provides a lower rate and more
stable revenue source than the corporate income tax (CIT), and
(5) demonstrate that the tax redistribution from a VAT-for-CIT
substitution depends on which VAT form is adopted. Implications
for tax policy are discussed.
Tax Reform and Charitable Contributions
of Appreciated Property
Cherie J. O'Neil, W. Eugene Seago, and G. Rodney
The Tax Reform Act of 1986 increases the cost of charitable giving
by reducing marginal tax rates and imposing an alternative minimum
tax on contributions of appreciated property. Prior studies indicate
that charitable donations are very sensitive to changes in marginal
tax rates; as the after-tax cost of giving increases, the amount
of contributions declines. This article demonstrates that the
after-tax cost of giving will increase substantially under the
new law. Further, imposing the alternative minimum tax on contributions
of appreciated property amounts to an unannounced change in tax
policy. A proposal to alleviate the harsh consequences of the
alternative minimum tax on contributions of appreciated property
Homeowner Preferences: The
Equity and Revenue Effects of Proposed Changes in the Status Quo
Bethane Jo Pierce
This study examined the equity and revenue effects of proposed
changes in the current federal income tax law relating to homeowner
preferences. These changes in homeowner preferences have been
put forth in the literature as a means of mitigating the inequitable
treatment afforded renters compared to homeowners. The 1982 IRS
Individual Tax Model File was used to calculate each taxpayer's
tax liability under current law and various alternative tax policy
options. Equity and revenue effects of various tax policy options
were compared with the equity and revenue effects of current law
(defined as Tax Reform Act of 1986 law, fully implemented). Horizontal
equity effects were measured using weighted average changes in
the coefficient of variation. Vertical equity effects were measured
using changes in the Suits index. Finally, the revenue impact
was compared with current law. Findings suggest that options that
limit or eliminate the mortgage interest deduction and/or real
property tax deduction would appear to be likely candidates for
future policy decisions, as these options are among the few that
increase both equity and revenue.
Reference Point Effects
In Taxpayer Decision Making
Michael S. Schadewald
A model of individual choice is an important input into many
types of tax research. Prior decision research suggests that risk
preferences vary with whether the outcomes involved are framed
as gains or losses. Prospect theory explains these effects as
shifts in the point of reference from which outcomes are evaluated.
Two experiments were performed to assess the applicability of
the reference point concept to tax reporting decisions. MBA students
served as subjects. Manipulations of two potential reference points
did not have a significant effect on the subjects' preferences
for aggressive tax return positions. Manipulating the reference
point implied by the description of a tax reporting problem also
did not have a significant effect, except when the potential outcomes
were also explicitly labeled as "gains" or "losses."
These results cast doubt on the importance of the reference point
concept in tax contexts.
An Analysis of the S Corporation
Election After the Tax Reform Act of 1986
Victor L. Genez and Susan L. Nordhauser
The Tax Reform Act of 1986 reduced tax rates for corporations
and individuals. It also increased the cost of liquidating a corporation
because of the repeal of the General Utilities doctrine. This
research analyzes mathematically the difference in cost between
operating as a regular C corporation and as an S corporation.
The surprising conclusion is that almost all new corporations
that are qualified to do so should elect S corporation status.
This is true even if the corporate tax rate is below the shareholders'
individual tax rate and even it dividends are paid during the
life of the corporation.
In general, the only new corporations that ultimately may be
better off as C corporations are those that pay tax at a low rate
relative to their shareholders and, in addition, will remain in
existence for a very long period of time (generally at least ten
years or more) or until the death of the shareholder-owners.
The Accounting Doctoral Program
with a Concentration in Taxation: A Report of the 1986-87 ATA
Committee on Doctoral Program Curricula in Taxation
Edmund Outslay, Valerie C. Milliron,
Patrick J. Wilkie, and Mark A. Wolfson
The charge to this committee was to (1) identify and describe
any "common body of knowledge" that should be reflected
in the curricula of accounting doctoral programs offering a specialization
in taxation, and to (2) determine the characteristics and/or minimum
requirements of a doctoral program that describes itself as offering
a specialization in taxation.
This report reflects the observations and opinions of the committee
on these issues. The primary focus of the report is on the research
dimension of the doctoral program. The committee recommends that
the primary research focus of the tax doctoral student should
be on "empirical-based" research, and we offer a framework
for structuring such an orientation in the program. While we recognize
the importance of training doctoral students to be effective teachers,
we do not provide detailed recommendations on how to address this
parameter because it was beyond the scope of the committee's charge.
However, we believe that good research is complementary to teaching
and that the benefits from research training should enhance teaching
activities as well.