JATA - Fall 1985

Volume 7, No. 1

Evaluating the Robustness of Multivariate Tax Models to Errors: A Section 162(a)(2) Illustration

William B. Pollard and Ronald M. Copeland


A general procedures is described for evaluating the robustness of multivariate empirical tax models to data input error. Our study focuses on 100 Tax Court cases concerning Section 1629a)(2)-location of the "tax home." The sensitivity of several linear discriminant models to random and systematic data error contamination, ranging between three and 30 percent, was tested in 600 Monte Carlo iterations. Robustness was measured with regard to three factors affected by errors: (1) the order in which variables enter the discriminant models, (2) the impact on standardized discriminant coefficients, and (3) the deterioration in model classification accuracy. Implications and extensions for future research are discussed.

An Analysis of the Relationship Between Tax Equity and Tax Complexity

Valerie C. Milliron


An unsettled issue in the current tax reform debate is whether complexity and equity are complementary or competing features of the income tax system. This study attempts to increase understanding of this relationship by using multidimensional scaling to investigate whether taxpayers' perceptions of complexity are independent of ideas traditionally associated with equity. Thirty prospective jurors were asked to compare the complexity of tax scenarios and then rate these scenarios, using bipolar complexity and equity descriptors. The results indicate that subjects view complexity and equity as incompatible features of the income tax system. Since this view appears to be independent of demographic and attitudinal data collected on the subjects, there may be a general perception across taxpayers that simplifying the tax law is consistent with improving equity.

The Viewed Importance of Investment Tax Incentives By Virginia Decision Makers

Clarence C. Rose and Cherie J. O'Neil


Business corporate executives were surveyed to obtain their perceptions of the importance of certain investment tax incentives in deciding to acquire new equipment. The responses were analyzed to determine if the viewed importance of tax incentives by business decision makers varies depending on the unused output capacity of their firms. The findings suggest that the effectiveness of investment tax incentives may be lowest during a period of economic recession. Also, business investment activity may be stimulated by a tax policy which generates additional demand for products and services, rather than one which offers investment tax incentives.

Allocation of Consolidated Taxes - Fiction in Financial Statements

Richard P. Weber


The separate financial statements of corporations which have joined in filing a consolidated tax return may, and often do, present tax figures which are not rationally related to the figures reported on the corporation's tax return. The mechanism through which the different figures arise and the accounting profession's response to them are examined in light of generally accepted accounting principles. Current accounting practice is found to be deficient and recommendations for improvement are made.

Value-Added Tax Collection Alternatives: Their Revenue, Cash Flow, and Micro Tax Policy Effects

Robert P. Crum


A value-added tax (VAT) is not one tax, but a range of taxes. The particular form it takes depends on the manner of calculation, and the importance of its role in relations to the tax base. This paper identifies the various perspectives of the tax base and the major factors determining a VAT's form. In the discussion of these factors, special consideration is given to the experiences that other countries have had with this type of tax. Calculation models are constructed for the 24 VAT forms defined by these factors. Based on the models, VAT remittance cash flows are simulated for each form, using a sample of 47 large U.S. industrial firms for the period 1978-82. Simulation results suggest that some of the identified factors have a significant effect on VAT remittances.

Subchapter S in Transition: A Comment

Janis R. Reeder and Karen A. Fortin


Jamison and Dilley (JD) in "Subchapter S in Transition" [1984] put forth a questionable interpretational procedure for handling S corporation cash distributions where a shareholder has Previously Taxed Income (PTI). The JD article presents two different PTI scenarios; one where the S corporation does not have accumulated earnings and profits (AEP) and one where AEP exists. The solutions JD supply for these examples seem to disagree. In this Comment, we briefly review the relevant provisions which affect the tax treatment of S corporation cash distributions in these special cases, and then examine the apparently contradictory examples.

Subchapter S in Transition: A Comment

Lorence L. Bravenec


Jamison and Dilley (JD) are to be complimented for a thoughtful article which will make a contribution to the literature on S corporations and shareholders, particularly on the rules applicable before and after the Subchapter S Revisions Act of 1982 (SSRA) relating to distributions by S corporations. Nevertheless, it is worthwhile to consider two erroneous positions taken by the authors in order to clarify and extend their article.

A Letter From Our President

Jenny Brown
ATA Section President

Greetings ATA Members and Colleagues,                             

Welcome to the 2023/2024 academic year!

First, thank you for giving me the opportunity to serve as your president this year. The ATA is an extraordinarily collegial group, and I feel privileged that it has been a significant part of my professional life since I was a PhD student at the University of Texas, 20-plus years ago. Over the years, I have seen the ATA change and evolve to better meet the needs of its members, but one thing remains the same ­– the ATA continues to be my primary professional home outside my own university. 


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