American Taxation Association

JATA abstracts - Spring 2005

JATA - Spring 2005

Volume 27, No. 1

The Impact of Income Tax Withholding Position and Stock Position on the Sale of Stock
Diana Falsetta and Richard A. White

Does Acquisition by Non-U.S. Shareholders Cause U.S. Firms to Pay Less Tax?
Jennifer L. Blouin, Julie H. Collins and Douglas A. Shackelford

An Examination of the Role of Ethics in Tax Compliance Decisions
B. Charlene Henderson and Steven E. Kaplan

The Use of Compensation for Tax Avoidance by Owners of Small Corporations
Gregory G. Geisler and Sally Wallace

What Corporations Say They Do, and What They Really Do: Implications for Tax Policy and Tax Research
Joel Slemrod


The Impact of Income Tax Withholding Position and Stock Position on the Sale of Stock

Diana Falsetta and Richard A. White

Abstract

The objective of this study is to investigate the effect that stock position (gain or loss) and income tax withholding position (tax payment or tax refund) have on the sale of stock at the end of the year. Prior investigations of stock position have shown that individuals are more likely to sell gain stocks and hold loss stocks (e.g., the disposition effect). However, studies also have found this pattern of behavior to reverse at year-end in an effort to reduce tax liabilities. We conduct two experiments (baseline and primary) to compare the sell or hold decision of participants with either a gain or loss stock. Results of the baseline experiment confirm the disposition effect. However, when participants become more sensitive to tax considerations, the results of the primary experiment support the tax-loss selling hypothesis. That is, participants tend to sell loss stocks and hold gain stocks. These results, while consistent with the tax-loss selling hypothesis, are contrary to the disposition effect, indicating that these effects are strongest when tax considerations are not a primary factor in the decision process. Furthermore, contrary to expectations, participants are not influenced by income tax withholding position. Their propensity to sell loss stocks relative to gain stocks at year-end is the same whether they are faced with a tax payment or a tax refund.  Top


Does Acquisition by Non-U.S. Shareholders Cause U.S. Firms to Pay Less Tax?

Jennifer L. Blouin, Julie H. Collins and Douglas A. Shackelford

Abstract

The U.S. corporate tax revenue implications for foreign-domiciled firms acquiring U.S. companies is an important and longstanding tax policy issue. This study attempts to provide some empirical underpinning for this controversial debate. We compare actual corporate taxable income before and after their 1996 acquisitions for 31 matched pairs of firms, half acquired by foreign-controlled companies and half acquired by American-controlled firms. Contrary to claims that foreign-controlled firms pay less tax, we find no evidence that taxable income declines more after a non-U.S. shareholder acquires a U.S.-domiciled firm than after a U.S. shareholder acquires a U.S.-domiciled firm.  Top


An Examination of the Role of Ethics in Tax Compliance Decisions

B. Charlene Henderson and Steven E. Kaplan

Abstract

The relationship between ethical beliefs and tax compliance is well documented, but extant research has not explored the relationships among general ethical beliefs, contextual ethical beliefs, and tax compliance behavior. In this study we propose a model that is intended to clarify the mechanisms through which ethical beliefs impact tax compliance. In the model, contextual ethical beliefs represent the mechanism through which individuals' general ethical beliefs impact tax compliance behavior. The model is tested using participants' ethical orientations as measures of their general ethical beliefs and using participants' ethical evaluations of others' tax compliance decisions as measures of their contextual ethical beliefs. Tax compliance behavior is inferred from participants' estimates of the likelihood that they would evade. Overall, the findings from our study support the proposed model. Ethical orientations are directly related to ethical evaluations; ethical evaluations directly predict tax compliance behavior; and finally, ethical orientations are indirectly related to tax compliance behavior. That is, ethical orientations influence tax compliance behavior, but only through their influence on ethical evaluations. We believe that the proposed model provides an important contribution by providing a framework that outlines the routes through which ethical beliefs impact tax compliance.  Top


The Use of Compensation for Tax Avoidance by Owners of Small Corporations

Gregory G. Geisler and Sally Wallace

Abstract

This study provides empirical evidence on the extent to which taxes influence owners' compensation in small (fewer than 500 employees) Subchapter Selecting corporations (S corporations), taxable corporations that provide professional services (PSC corporations), and other taxable corporations (C corporations). Paying additional compensation to owner-employees likely increases the total after-tax income for PSC corporations with positive taxable income. Paying additional compensation to owner-employees is, however, less likely to increase the total after-tax income for C corporations and does not increase the total after-tax income for S corporations. Using data from the corporate tax returns of 503 small corporations, this study examines the marginal change in owners' compensation as taxable income changes. The study finds that, per dollar of taxable income, PSC corporations increase compensation to owneremployees significantly more than C corporations.  Top


What Corporations Say They Do, and What They Really Do: Implications for Tax Policy and Tax Research

Joel Slemrod

Invited Article - No Abstract

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