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Tax Treatment (tax + treatment)
Selected AbstractsA Note on the Tax Treatment of Private Pensions and Individual Savings AccountsFISCAL STUDIES, Issue 1 2000CARL EMMERSON The UK government is planning to introduce stakeholder pensions from April 2001 as an alternative to existing personal pensions for people on moderate earnings. But stakeholder pensions are only one way to save for retirement; the new tax-free Individual Savings Account (ISA) is another. This note compares the tax treatments of pensions and ISAs and assesses the conditions under which the tax treatment of private pensions is more generous than that of an ISA to a basicrate taxpayer , the typical target for stakeholder pensions. The abolition of dividend tax credits paid to pension funds in July 1997 reduced the relatively tax-favoured position of pensions, but the tax-free lump sum means that private pensions continue to be a tax-favoured form of saving at most reasonable rates of return. We show that employer contributions to private pensions are particularly tax-favoured. [source] Share Repurchases, Dividends and Executive Options: the Effect of Dividend ProtectionEUROPEAN FINANCIAL MANAGEMENT, Issue 1 2006Eva Liljeblom G12; G32; G35 Abstract We study the determinants of share repurchases and dividends in Finland. We find that higher foreign ownership serves as a determinant of share repurchases and suggest that this is explained by the different tax treatment of foreign and domestic investors. Further, we also find support for the signalling and agency cost hypotheses for cash distributions. The fact that 41% of the option programmes in our sample are dividend protected allows us to test more directly the ,substitution/managerial wealth' hypothesis for the choice of distribution method. When options are dividend protected, the relationship between dividend distributions and the scope of the options programme turns to a significantly positive one instead of the negative one documented in US data. [source] IRC § 71 MAY IMPOVERISH CHILDREN, ENDANGER EX-WIVES, AND DISRUPT FEDERALISM1FAMILY COURT REVIEW, Issue 4 2008Michael Waggoner The Internal Revenue Code provides that alimony will be deductible to the payor and taxable to the payee. Although this treatment may seem contrary to the payee's interest, compared to making the payments non-deductible and nontaxable, it can increase the payee's after-tax income. The payor's deduction will allow larger payments at no after-tax cost increase; if the payee is in a lower tax bracket, then even after paying taxes the payee will have more resources. Because this favorable treatment of alimony does not apply to child support, children of divorce are poorer. Nor does the favorable treatment apply to lump-sum payments, making this option less generous, even though many states have phased down the grant of alimony. Because the definition of alimony requires that it end with the payee's death,to protect the treatment provided for lump sums,the tax system is on the wrong side of the issue of violence against ex-spouses (typically the ex-wife). The article proposes extending to other similar payments the favorable tax treatment now provided for alimony. [source] Anticipating Tax Changes: Evidence from the Finnish Corporate Income Tax Reform of 2005,FISCAL STUDIES, Issue 2 2008Seppo Kari H25; H32 Abstract Using register-based panel data covering all Finnish firms from 1999 to 2004, we examine how corporations anticipated the 2005 dividend tax increase via changes in their dividend and investment policies. The Finnish capital and corporate income tax reform of 2005 creates a useful opportunity to measure this behaviour, since it involves exogenous variation in the tax treatment of different types of firms. The estimation results reveal that those firms that anticipated a dividend tax hike increased their dividend payouts in a statistically significant way. This increase was not accompanied by a reduction in investment activities, but rather was associated with increased indebtedness in non-listed firms. The results also suggest that the timing of dividend distributions probably offsets much of the potential for increased dividend tax revenue following the reform. [source] A Note on the Tax Treatment of Private Pensions and Individual Savings AccountsFISCAL STUDIES, Issue 1 2000CARL EMMERSON The UK government is planning to introduce stakeholder pensions from April 2001 as an alternative to existing personal pensions for people on moderate earnings. But stakeholder pensions are only one way to save for retirement; the new tax-free Individual Savings Account (ISA) is another. This note compares the tax treatments of pensions and ISAs and assesses the conditions under which the tax treatment of private pensions is more generous than that of an ISA to a basicrate taxpayer , the typical target for stakeholder pensions. The abolition of dividend tax credits paid to pension funds in July 1997 reduced the relatively tax-favoured position of pensions, but the tax-free lump sum means that private pensions continue to be a tax-favoured form of saving at most reasonable rates of return. We show that employer contributions to private pensions are particularly tax-favoured. [source] The Tax Consequences of Long-Run Pension Policy,JOURNAL OF APPLIED CORPORATE FINANCE, Issue 1 2006Fischer Black A firm's pension fund is legally separate from the firm. But because pension benefits are normally independent of fund performance, pension assets impact the firm very much as if they were firm assets. Because they are worth more when times are good and less when times are bad, common stocks in the pension fund add to the sponsoring firm's leverage. They cause contributions to a pension fund to be high just when the firm can least afford to pay them. Conversely, bonds in the pension fund will make it easier for the firm to avoid default on its own bonds when times are bad all over: The more bonds a pension fund buys, the more the firm can borrow. The tax treatment accorded the pension fund differs notably from that accorded the firm. Some have argued that a firm can capitalize on the difference by accelerating the funding of its pension plan. The benefits of full funding are wasted, however, unless the added contributions to the fund are invested in bonds; higher pension contributions now mean lower contributions later, hence higher taxes later. The benefits come from earning, after taxes, the pretax interest rate on the bonds in the pension fund. If the firm wants to take advantage of the differing tax treatment of bonds without altering the level of its current pension contributions, it can (1) sell stocks in the pension fund and then buy bonds with the proceeds while (2) issuing debt in the firm and buying back its own shares with the proceeds. An investment in the firm's own stock creates no more tax liability than an investment in stocks through the pension fund. [source] WHAT DO WE KNOW ABOUT STOCK REPURCHASES?JOURNAL OF APPLIED CORPORATE FINANCE, Issue 1 2000Gustavo Grullon Stock repurchases by U.S. companies experienced a remarkable surge in the 1980s and ,90s. Indeed, in 1998, the total value of all stock repurchased by U.S. companies exceeded for the first time the total amount paid out as cash dividends. And the U.S. repurchase movement has gone global in the past few years, spreading not only to Canada and the U.K., but also to countries like Japan and Germany, where such transactions were prohibited until recently. Why are companies buying back their stock in such amounts? After dismissing the popular argument that stock repurchases boost earnings per share, the authors argue that repurchases serve to add value in two main ways: (1) they provide managers with a tax-efficient means of returning excess capital to shareholders and (2) they allow managers to "signal" to investors their view that the firm is undervalued. Returning excess capital is value-adding for two reasons: First, it helps prevent companies from pursuing growth and size at the expense of profitability and value. Second, by returning capital to investors, repurchases (like dividends) play the critically important economic function of allowing investors to channel their investment from mature or declining sectors of the economy to more promising ones. But if stock repurchases and dividends serve the same basic economic function, why are repurchases growing more rapidly? Part of the explanation is that, because repurchases are taxed as capital gains and dividends as ordinary income, repurchases are a more tax-efficient way of distributing excess capital. But perhaps even more important than their tax treatment is the flexibility that (at least) open market repurchases provide corporate managers-flexibility to make small adjustments in capital structure, to exploit (or correct) perceived undervaluation of the firm's shares, and possibly even to increase the liquidity of the stock, which could be particularly valuable in bear markets. For U.S. regulators, the growth in open market stock repurchases raises some interesting issues. Perhaps most important, companies are not required to (and rarely do) furnish their investors with details about a given program's structure, execution method, number of shares repurchased, or even its duration. Policy regulators (and corporate executives as well) should consider some of the benefits provided by other systems, notably Canada's, which provide greater transparency and more guidelines for the repurchase process. [source] When States Discriminate: The Non-uniform Tax Treatment of Municipal Bond InterestPUBLIC ADMINISTRATION REVIEW, Issue 3 2009Dwight V. Denison There is a long history of states using tax systems to encourage residents to invest in bonds issued by jurisdictions within their state. This preferential or discriminatory tax treatment was ruled unconstitutional in 2006 by the Kentucky Court of Appeals. The Kentucky court decision, which sets the stage for this essay, was overturned by the U.S. Supreme Court in 2008. This essay addresses the possible implications of this and similar discriminatory tax policies. Such discriminatory policies are the foundation of the municipal bond market, and altering the practice would have significant implications for revenue collections and borrowing costs in most states and localities. While the Supreme Court's position has been rendered, the case has caused policy makers and administrators to scrutinize discriminatory tax policies and their impact on budgets and borrowing costs. [source] A Note on the Tax Treatment of Private Pensions and Individual Savings AccountsFISCAL STUDIES, Issue 1 2000CARL EMMERSON The UK government is planning to introduce stakeholder pensions from April 2001 as an alternative to existing personal pensions for people on moderate earnings. But stakeholder pensions are only one way to save for retirement; the new tax-free Individual Savings Account (ISA) is another. This note compares the tax treatments of pensions and ISAs and assesses the conditions under which the tax treatment of private pensions is more generous than that of an ISA to a basicrate taxpayer , the typical target for stakeholder pensions. The abolition of dividend tax credits paid to pension funds in July 1997 reduced the relatively tax-favoured position of pensions, but the tax-free lump sum means that private pensions continue to be a tax-favoured form of saving at most reasonable rates of return. We show that employer contributions to private pensions are particularly tax-favoured. [source] Personal Taxation in Firm Market Valuation: Theory and Test,ACCOUNTING PERSPECTIVES, Issue 1 2002ZENG TAO ABSTRACT In this paper, I extend Ohlson's 1995 firm market valuation model to incorporate personal taxes: the taxes on dividends and the taxes on capital gains. Without personal taxes, firm market value can be expressed as the present value of future benefits received by the shareholders (dividends, in this case). With personal taxes, the benefits received by the shareholders should be classified into three categories (due to their different tax treatments): dividends, share repurchases, and new share issues (i.e., contributed capital). The extended model shows the effects of personal taxation on firm market valuation: retained earnings are valued less than contributed stocks, both dividends taxes and capital gains taxes affect retained earnings valuation and firm market value, and firms choose cash distribution methods (paying dividends and repurchasing shares) to increase their retained earnings valuation, therefore increasing their market value. An empirical test using a sample from the Disclosure Select Canada and Financial Post Card data bases for the years 1995-98 supports these personal tax effects. [source] | ||||||||||