Internal Revenue Code Section Research Articles

Relationship-Specific Investments and the Transfer Pricing Paradox

The revised Treasury Regulations interpreting Internal Revenue Code Section 482 allow the use of profit-based transfer pricing methods, as well as the older methods based on prices from comparable transactions between independent parties. This paper compares the effects of price-based and profit-based transfer pricing methods on the allocation of taxable income in a model in which organization structure affects the level of relationship-specific investments made by vertically integrated groups and comparable independent firms. Analysis of the model shows that the price-based methods systematically allocated more taxable income to foreign subsidiaries and less to domestic parents than does the profit-based method.

Does incentive compensation lower executives' willingness to take risks?

The article reports on a study by Randolph P. Beatty and Edward J. Zajac concerning initial public offerings (IPO), risk exposure, and executive compensation. The researchers found that executives at firms that are strategically risky were less likely to accept non-cash incentives such as stock options because of the risk associated with holding the corporation's stock. Alternative governance mechanisms are used to monitor top management including independent directors on the corporate board and venture capital backing. An amendment to the United States Internal Revenue Code Section 162m is criticized for its potential to inhibit entrepreneurship.

Qualified domestic relations orders: Qualification is not the problem

AbstractDomestic relations orders that are intended to meet the requirements of qualified domestic relations orders (QDROs) under Internal Revenue Code Section 414(p) are commonly prepared by mediators and other matrimonial law practitioners who are not familiar with pension plans or pension law. As a. result, QDROs that meet the legal requirements are often written without adequate consideration of the pitfalls and opportunities presented by the terms of the pension plan or Section 401 (k) plan to which the order applies.

Tax Incentives and Capital Structures: The Case of the Dividend Reinvestment Plan

This study investigates the impact of 1981 tax legislation (Internal Revenue Code (IRC) Section 305(e)) creating tax deferral for dividend reinvestment plans (DRPs) of qualifying utility companies. The intent of the legislation was to assist public utilities in raising new equity capital by encouraging reinvestment of dividends in qualifying firms. The effectiveness of this legislation is in doubt for at least two reasons. First, the tax benefits to any taxpayer were only $750 for single returns and $1,500 for joint returns. Second, clientele arguments (Miller [1977] and Miller and Scholes [1982]) suggest that taxpayers subject to low marginal rates would be typical investors in utility stocks. Both conditions imply that the economic incentives associated with dividend deferral might be small. Our results indicate that the second condition-low marginal rate taxpayers holding utility stocks-is not observed. Specifically, we observe a positive share price reaction at announcements related to

Foreign recordkeeping under Internal Revenue Code Section 603814 - violation of the United States constitution and of international law

Foreign recordkeeping under Internal Revenue Code Section 603814 - violation of the United States constitution and of international law

What is the proper tax accounting treatment for noninventory taxpayers performing manufacturing and production services?

AbstractNotice 89‐15 requires a taxpayer performing services to capitalize its costs under Internal Revenue Code Section 263A. This position is flawed. Section 263A is inapplicable to taxpayers providing manufacturing or production services under contracts that provide that the customer has title to the property as it is being produced. There was no requirement that such a taxpayer capitalize or otherwise defer the costs incurred in providing such services prior to the enactment of Section 263A, and Section 263A did not create such a requirement.

Increased Salary as an Alternative to Group Term Life Insurance

Increased Salary as an Alternative to Group Term Life Insurance

Deducting the Cost of Smoking Cessation Programs under Internal Revenue Code Section 213

Deducting the Cost of Smoking Cessation Programs under Internal Revenue Code Section 213

Accrual of Gambling Debts under Internal Revenue Code Section 451

Accrual of Gambling Debts under Internal Revenue Code Section 451

A Definition of "Liabilities" in Internal Revenue Code Sections 357 and 358(d)

A transfer of property to a controlled corporation in exchange for the corporation's stock typically will not cause the transferor to recognize gain or loss on the exchange because of the nonrecognition provision of IRC Section 351. The transferor's basis in the stock received will equal the basis of the transferred property reduced by any liabilities that the corporation assumed or accepted in the transaction. IRC Section 358(d). If such liabilities exceed the basis that the transferor had in the transferred property, the excess will constitute gain to the transferor under IRC Section 357(c). The focus of this article is on the question of just what type of obligations constitute a liability for purposes of Section 357 and 358. Resting on a transactional analysis and on the history of the manner in which the Crane or Tufts doctrine was applied to obligations, the authors conclude that an obligation which would be deductible by the transferor when paid is not a liability as that term is used in those two Code sections. Citing this article and adopting its reasoning, a majority of the Tax Court reversed its prior position and excluded such obligations from those provisions. Focht v. Commissioner, 68 T.C. 223 (1977). Subsequently, Congress adopted the approach of this article when it added Sections 357(c)(3) and 358(d)(2) to the Code. The approach of this article was later extended by Congress to cancellation of indebtedness issues when Section 108(e)(2) was added to the Code in 1980.

Minimizing Taxes on Professional Income (Internal Revenue Code Section 107)

Minimizing Taxes on Professional Income (Internal Revenue Code Section 107)

Effect of Internal Revenue Code Section 115(g)(1) on the "Shoestring Purchase" of a Corporation

Effect of Internal Revenue Code Section 115(g)(1) on the "Shoestring Purchase" of a Corporation

Income Tax: Collapsible Corporations: Ordinary Income v. Capital Gain: Internal Revenue Code Section 117 (m)

Income Tax: Collapsible Corporations: Ordinary Income v. Capital Gain: Internal Revenue Code Section 117 (m)

The Case of the Forgotten Basis: An Admonition to Victims of Internal Revenue Code Section 115(g)

The Case of the Forgotten Basis: An Admonition to Victims of Internal Revenue Code Section 115(g)