American Taxation Association

JATA summaries - Summer 1980

JATA - Summer 1980

Volume 2, No. 1

Optimal Depreciation Methods When Marginal Tax Rates Increase
John C. Lere

Inter Vivos Gifts: An Anachronism?
Richard B. Byars, Charles A. Nikerson

Ethical Behavior in IRS Tax Practice
Barry C. Broden

An Alternative Final Examination – A Tax Debate
Edward J. Schnee


Optimal Depreciation Methods When Marginal Tax Rates Increase

John C. Lere

ATA Summary

Since the value of a business entity can be represented as the discounted present value of future cash flows, the depreciation method which yields the larger present value also yields the higher value of a business entity.  The author concludes that there are conditions under which straight-line depreciation would be preferred to SYD by a firm attempting to maximize present value.

Research Methodology:  Derivation of the tax rate change model used in this article progresses directly from familiar present value formulas and extensions from "Present Value Shortcuts" by Sussman, The Accounting Review (April, 1965).  No data is presented or statistical analysis performed.   Top

Inter Vivos Gifts: An Anachronism?

Richard B. Byars, Charles A. Nikerson

ATA Summary

After the 1976 revision in the estate and gift tax laws, there was a pervasive view that inter vivos gifts were no longer advantageous.  The authors formulate a model to compare transfers at death to inter vivos transfers.  They conclude that an inter vivos gift is always advantageous if the donee's after-tax rate of return on cash is greater than the donor's, the marital deduction is not affected, and death does not occur within 3 yrs. following the date of the gift.  The paper considers only small gifts.

Research Methodology:  The authors' model defines the amount that would be transferred to an heir (Y) upon the death of X as the currently available cash increased by the yield accruing to X during his remaining lifetime and reduced by estate taxes attributable to the sum.   The authors make present value comparisons and present a numerical example.  No data is presented and no statistical analysis is performed.   Top

Ethical Behavior in IRS Tax Practice

Barry C. Broden

ATA Summary

The study addresses the extent of misconduct in IRS tax practice by CPAs, the types of abuses that exist, and the punishments, and possible causes and solutions.  The author concludes that the greatest number of violations of ethical behavior occur in the lower social strata of the profession and that there is adequate enforcement.

Research Methodology:  The author examines statistics provided by the Office of Director of Practice of the U.S. Treasury Dept., related the data to demographic and professional factors, and conducted interviews.  Results of other studies and surveys were also presented.  Analysis of the significance of percentage differences was purely subjective.  No sophisticated statistical analysis was performed. Top

An Alternative Final Examination – A Tax Debate

Edward J. Schnee

ATA Summary

The author suggests inclusion of a tax debate as a testing device to ensure and improve communication skills of accounting graduates.  While the success of the debate cannot be measured directly, it could be inferred from improved performance. The author describes the benefits, format and judging procedures for a debate, and presents a sample case suitable for use.

Research Methodology:  Informal interviews were conducted with former students who had participated.  No data was gathered or presented and no analysis performed.  Conclusions as to the desirability of the debate were purely the subjective opinions of the author.  Top

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