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Copyright of FinanzRundschau is the property of De Gruyter and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

The article focuses on the laws governing taxation of income from the sale of subscription rights and shares in Germany using the example of the TUI AG capital increase. It mentions that the capital increase of TUI AG shows that participation in the capital increase without a design can lead to a considerable additional tax burden compared to design models, the latter can cause volatile price developments in subscription rights.

Anyone can buy stock in a public company, but not all shareholders are equally committed to a company's long-term success. In an increasingly fragmented financial world, shareholders' attitudes toward the companies in which they invest vary widely, from time horizon to conviction. Faced with indexers, short-term traders, and activists, it is more important than ever for businesses to ensure that their shareholders are dedicated to their missions. Today's companies need "quality shareholders," as Warren Buffett called those who "load up and stick around," or buy large stakes and hold for long periods. While scholars in recent years have extensively debated indexers, short-term traders, and activists, they have paid scant attention to quality shareholders and their critical role in corporate finance and governance. This Article corrects this oversight by highlighting the quality shareholder cohort. Adding this fresh perspective confirms some of the angst about myopic short-termism on the one hand and ignorant indexing on the other, but rather than suggesting tighter regulation of such behaviors, the reframing invites attention to empowering quality shareholders. In particular, rather than taxing short-term shareholders or passing through indexer voting rights, this Article explains how companies could simply increase the voting power of their quality shareholders to recognize their value and to attract them. [ABSTRACT FROM AUTHOR]

The article talks about the stock lending and beneficial ownership of securities. It mentions that the judgment of FG Hessen deals essentially with the tax treatment of securities lending beyond the dividend cut-off date; and shares transferred is subject to a more favorable dividend taxation than the person who transfers its shares. It mentions about the requirements for a tax refund or tax credit.

The federal income tax treatment of individuals' capital gains is complicated. In addition to differing treatment for long-term versus short-term capital gains, gains are treated differently within the long-term group (e.g., collectibles gain versus gain on the sale of stock). This article explains the federal income tax treatment of capital gains and losses using diagrams and examples to make it easier to understand. [ABSTRACT FROM AUTHOR]

In the current environment of rising income taxes and aging business owners from the baby boom generation, employee stock ownership plan (ESOP)-owned companies are likely to continue to grow in popularity. Executive talent has become highly mobile, and ESOP-owned companies in particular must seek out reward and retention programs that go beyond the mere granting of stock options and restricted stock. Both split-dollar life insurance and nonqualiied deferred-compensation plans have features that serve as alternative executive beneit arrangements. [ABSTRACT FROM AUTHOR]

The article highlights decision of a German court that decided no loss compensation for a negative capital account in consequence of drawing up a negative supplementary balance of a share in purview of the Section 20 of the Umwandlungssteuergesetz (UmwStG) 2006 business reorganization tax law. It reports that the court considers a limited partner's capital account with a negative supplementary balance sheet, which results from the exercise of the right to vote.

Abstract This paper examines the impacts of three types of financial incentives on non-renewable resource extraction that produces reversible stock pollution. A particular emphasis is the timing of remediation. We show that traditional standards-based regulation incentivizes operators to delay remediation. A policy that instead requires the operator to pay ongoing damages from the pollution stock via a Pigouvian stock tax is socially optimal and provides the operator with the correct incentives to remediate the pollution stock. A Pigouvian pollution flow tax, which has been a popular recommendation in the stock pollution literature, does not generate these remediation incentives. Nor do financial assurances, also known as reclamation bonds. The financial incentives embodied in mine regulatory reform in the United States, China and Western Australia have no explicit intention of implementing a Pigouvian stock tax. They are therefore unlikely to incentivize optimally timed remediation by the firm, even though the policy reforms have been driven by a recognition that past standards-based policies were ineffective at incentivizing timely remediation. Highlights • Non-renewable resource extraction creates reversible stock pollution. • Current standards-based regulations do not adequately incentivize operators to reclaim these wastes at closure. • We model the effects of financial incentives to reclaim. • Pollution stock taxes are superior to financial assurances to reclaim. [ABSTRACT FROM AUTHOR]

The article assesses the performance of valuation models in providing estimates of the value of traded securities and accounting for executive stock options. The authors discuss the usability of the models in employment contract negotiations and the similarity of the taxation between traded warrants and stock options. The authors explain that some caution should be exercised in applying these models to executive stock option valuations. The difference between warrants and stock options is also discussed.

Copyright of Contemporary Accounting Research is the property of Canadian Academic Accounting Association and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Copyright of Contemporary Accounting Research is the property of Canadian Academic Accounting Association and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Citizens Utilities Company (CU), Stamford, CT, has two classes of common stock, one paying cash dividends and one paying stock dividends. Unless CU shareholders ignore dividend taxation, the price of the cash dividend shares should increase relative to the stock dividend shares after the 1986 tax change. Contrary to this hypothesis, we find that the relative valuation of these two classes of shares was not permanently affected by the tax change. We do observe a pricing change around the time of the tax reform, but the effect is only temporary--the relative valuation before the tax change (1982-1984) and after (1987-1989) is almost equal. Two possible explanations for the observed valuation of the two stocks are clientele effects and differences in liquidity. We find that neither of these explanations can account for the relative pricing of the shares. [ABSTRACT FROM AUTHOR]

I test the disposition effect, the tendency of investors to hold losing investments too long and sell winning investments too soon, by analyzing trading records for 10,000 accounts at a large discount brokerage house. These investors demonstrate a strong preference for realizing winners rather than losers. Their behavior does not appear to be motivated by a desire to rebalance portfolios, or to avoid the higher trading costs of low priced stocks. Nor is it justified by subsequent portfolio performance. For taxable investments, it is suboptimal and leads to lower after-tax returns. Tax-motivated selling is most evident in December. [ABSTRACT FROM AUTHOR]

This paper demonstrates that, contrary to the results of previous studies, the impact of inflation on the aggregate debt-asset ratio cannot be determined theoretically. However, it is shown that inflation is likely to increase this ratio when personal income tax schedules are indexed to the price level and/or when leverage-related costs are relatively high and the personal tax rate on income from holding common stocks is relatively low. [ABSTRACT FROM AUTHOR]

The paper relates two phenomena in the stock market: the high return during the month of January and the apparent existence of widespread sales of stocks for tax purposes towards the end of the fiscal year. The findings suggest that, due to the tax-induced sales, the price of many stocks over the last 35 years was temporarily depressed in December but recovered in the following January. This price recovery is a major contributor to the high returns observed in January. The tax effect is present in firms of all sizes but much more pronounced for small firms. The analysis also indicates that a more precise identification of the tax-switch candidates may prove that the tax-induced sales are, in fact, the sole contributor to the high January's returns. [ABSTRACT FROM AUTHOR]

A recurring topic in the literature of finance is that of the impact of a firm's dividend policy on the valuation of its shares. From the time of the early arguments of Graham and Dodd and the landmark study by Lintner, through the theoretical and empirical work of Gordon, the classic dividends-irrelevance proposition of Miller and Modigliani, and the more recent empirical investigations by Friend and Puckett, Diamond, and Black and Scholes, the dispute as to a dividend effect has continued. Although the issue would appear even yet not to be fully resolved, the character of the debate was modified substantially by the Miller-Modigliani demonstration that, in a perfect capital market, dividend policy cannot matter—given an established investment policy. Since then, the emphasis of conjectures that dividends nonetheless may still matter in practice has shifted to a concern primarily with market imperfections as an underlying cause. We offer here some evidence which bears on the potential role of one of the key such imperfections commonly cited: differences in the rates of tax paid by different investors on their dividend receipts. In particular, we shall address the question as to whether a tax-induced "clientele" effect seems present in fact in the equities marketplace. Since treatments of the other side of the dividend coin—the acceptability criteria for investment projects financed by retained earnings—have also generally contended that investor tax rates bear on the problem, there are a number of ramifications for managerial decisions if a clientele array can be discerned. [ABSTRACT FROM AUTHOR]

The article discusses the benefits of a tax basis step-up in relation to business acquisition planning and taxation law in America. Taxation involving asset purchases and corporate stock acquisitions is addressed, along with depreciation and amortization deductions and acquisitions of interests in single-member limited liability companies (LLCs). U.S. federal income tax laws and an entity taxed as a partnership are examined, along with taxation involving purchasers and sellers in America.

The article focuses on the negative effects of the capital gains taxes on the entrepreneurship as capital gains taxation can affect firms' investment decisions by affecting the cost of equity capital and its impact on the risk-taking.

Equity investors in Australian infrastructure commonly seek protection of their investments by obtaining some certainty over the investment vehicle's governance and its operations, through entering agreements covering these areas. The ATO has expressed the view that the protections employed by minority equity investors may confer on individual investors the control ("negative control") of the vehicle and its operations. This article explores the ATO's views and considers whether an alternative view is open, one which would provide greater certainty, and which would not have an unreasonably adverse impact on infrastructure investment. The article considers the ATO's views on the concept of control in the context of the public trading trust regime, and the thin capitalisation regime. The authors then provide a deeper analysis, and conclude with a discussion of possible ways to undo or mitigate the uncertainty caused by the ATO's position. [ABSTRACT FROM AUTHOR]

An introduction to the journal is presented which discusses topics within the issue including taxation of income from the sale of subscription rights and shares, taxation of business termination profits, and Unprecedented Tax Innovation 2.0.

In this article, the authors focus on the after-tax performance of several smart-beta strategies. These strategies have higher turnover than the capitalization-weighted index, which leads to a greater tax on returns. Despite this drag, most strategies retain a long-term excess return. The authors also test the effectiveness of tax-managed versions of the strategies. They observe that, relative to most active managers, smart-beta strategies have lower turnover, greater breadth, and are less concerned with stock selection. By allowing a tracking-error risk budget versus the original strategy, tax management can reduce much of the tax impact. [ABSTRACT FROM AUTHOR]

On December 4, 2013, the IRS and the Treasury Department issued proposed regulations under Section 871(m) of the Internal Revenue Code that, if finalized in their current form, would impose withholding tax on any U.S. equity-linked instruments that satisfy a "delta"-based withholding standard, even if those instruments do not in fact reference dividend payments. The proposed regulations are broad, lack clarity, may be difficult to comply with, and could invite transactional structures motivated by tax avoidance. This article discusses the proposed regulations, as well as the current withholding rules. [ABSTRACT FROM AUTHOR]

The article reports on various attributes of ownership. Topics discussed include laws made for regulating the ownership of stocks, laws for the treatment of hedged ownership and laws for regulating the taxation of the hedged stocks. It further discusses the difference in treatment of hedged and unhedged stock ownerships.

Much like the Brood II cicadas, a misguided policy idea has reappeared after a long period of dormancy. It would prevent a taxpayer selling part of his holdings in a particular stock from identifying which shares are being sold. Currently, proposals to make this change are extant in both the 2013 Camp proposals and the 2014 Obama Budget Proposal. The author argues that current law permitting taxpayers to identify shares when selling stock promotes fairness and neutrality, and that repeal of this provision would be a policy blunder. [ABSTRACT FROM AUTHOR]

Non-U.S. issuers of corporate stock listed on foreign exchanges that want to make their stock accessible to U.S. investors frequently participate in ADR programs in the U.S. In July 2013, the Internal Revenue Service released a memorandum from its Office of Chief Counsel concluding that payments by a U.S. depositary institution to a foreign corporate issuer in exchange for the exclusive right to sponsor an American Depositary Receipts program are (1) subject to 30 percent U.S. withholding unless otherwise reduced by treaty and (2) treated as "Other Income" under the U.S. and OECD model income tax treaties. This article discusses that memorandum and its potential impact on issuers. [ABSTRACT FROM AUTHOR]

We study the ex-dividend return in the Colombian stock market between 1999 and 2007, period that includes the merger of the former three Colombian stock exchanges in the Bolsa de Valores de Colombia in July 2001. Contrary to the Efficient Market Hypothesis, we found positive and statistically significant ex-dividend returns in the sampled period, only in part explained by transaction cost and tax effects. Moreover, even subtracting transaction costs and tax effects, a dividend capture strategy would have gotten positive and economically sizable returns between 2006 and 2007 in the most liquid stocks. The decrease of those ex-dividend returns is also reported along the studied period, providing evidence of increasing informational efficiency after the merger of the three stock exchanges. Methodologically, this study highlights the importance of accounting for frictions in both academic efficiency studies and in testing speculative strategies by practitioners. [ABSTRACT FROM AUTHOR]

The article focuses on the taxation of intermediary stock sales and the impact of the judgment in the U.S. court case Starnes v. Commissioner. Information is provided on the case, which dealt with tax liability for stock sales, fair market value, international revenue law in the U.S. Topics include the sale of appreciated target assets and the incongruity of stock shareholder distributions.

Founders of a start-up usually take common stock as a large portion of their compensation for current and future labor efforts. By electing to pay a nominal amount of ordinary income tax on the speculative value of the stock when it is received, founders pay tax on any appreciation at the long-term capital gains rate. This Article argues that the preferential tax treatment of founders' stock is not normatively justified. The economic efficiency case for a tax preference for founders' stock is weak: Tax has a limited effect on entrepreneurial entry. Geographic, cultural, and business factors are far more important, as are nontax legal factors like bankruptcy, employment law, immigration policy, and securities law. Tax is a blunt policy instrument, and given the problems associated with direct government subsidies, the optimal level of government subsidy of entrepreneurship may be zero. The case for reform is compelling. Taxing founders at a low rate is a conspicuous loophole in the fabric of our progressive income tax system, uniquely undermining our shared commitment to equal opportunity and distributive justice. Founders' stock is often bequeathed to heirs who receive a step up in basis, leaving a legacy of dynastic wealth that is exempt from the income tax and subject only to the rather dodgy application of the estate tax. While it would be normatively desirable to tax gains from founders' stock at the same rate as labor income, fixing the problem is not administratively feasible within our current tax system. I offer solutions that policymakers might consider as part of a broader tax reform and deficit reduction effort. [ABSTRACT FROM AUTHOR]

The article reflects on the cases Calloway v. Commissioner and Anschutz Co. v. Commissioner. Both cases involve questions of legal ownership, in Calloway it is in relation to a stock loan, in Anschutz it is in relation to variable prepaid forward contracts (VPFC). The author claims that both cases rely almost exclusively on the precedent set down in “Reflection on Ownership: Sales and Pledges of Installment Obligations” by Walter Cliff and Philip Levine. While he respects Cliff and Levine’s book, he believes that the citing of them as precedent is a misapplication of the law.

The article presents a proposal for a financial transaction tax (FTT). It is argued that an FTT would function by taxing transactions involving stocks, currencies and debt instruments. It would be a progressive tax, with most of the revenue coming from wealthy individuals or corporations. It is argued that an FTT would have a salutary dampening effect on overly volatile financial markets. The popular appeal of such a tax, which could be characterized as benefiting mainstream Americans at the expense of financial tycoons, is also noted. An example involving stock trading is provided.

This paper addresses the design of corrective taxation schemes to manage multiple, interacting stocks. In the setting of irrigation-induced salinity, a collective groundwater stock aliments a set of individual rootzone salt stocks. It is shown that the policy maker does not need to base the tax rule on the individual salt stocks. Indeed, taxes based on the level of input and on the collective stock induce the agents to achieve the socially optimal irrigation path. An even simpler instrument is sufficient if the policymaker's goal is to reach optimality at the steady state only. [ABSTRACT FROM AUTHOR]

We argue that a transaction tax is likely to amplify, not dampen, volatility in foreign exchange markets. Our argument stems from the decentralized trading practice and the presumable discrepancy between ‘informed’ and ‘uninformed’ traders' valuations. Given that the informed valuations are likely to be less dispersed, a transaction tax penalizes informed trades disproportionately, leading to increased volatility. Empirical support for this prediction is found by investigating the effect of transaction costs on the volatility of DEM/USD and JPY/USD returns. High-frequency data are used and an increase in transaction costs is found to have a significant positive effect on volatility. Copyright © 2009 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

This paper explores the relationship between tax-induced dividend clientele theory and the recent changes to the taxation of income trusts in Canada. On October 31, 2006, the Canadian government announced the Tax Fairness Plan ( TFP) calling for the elimination of the considerable tax advantage enjoyed by income trusts. Generally, distributions from income trusts are now taxed at rates comparable to those imposed on corporate dividends. We examine market reaction to the TFP to address three issues: first, whether the valuation effect of a dividend tax increase is consistent with the traditional or the new view of dividend taxation; secondly, whether the market reaction to tax increases has a differential impact on firm value that is related to the tax preferences of taxable, tax-exempt, and foreign investor tax clienteles; and thirdly, whether firms change their dividend policies in response to the preference of institutional investors (tax-based dividend policy effect) or whether institutional investors are sorting themselves across firms based on their dividend policies (investor sorting effect). Our results provide strong evidence as follows. First, the valuation effect in reaction to the TFP announcement is consistent with the traditional view of dividend taxation – i.e. that taxes on dividends reduce the net return to investors, increase the firm's cost of capital and lower the firm's ability to access capital markets, thereby discouraging investment and savings. Secondly, we saw that trusts with a larger percentage of their units held by tax-exempt, low-tax, and foreign investors had a higher decline in value when compared with trusts held mostly by ordinary taxable investors. These results support dividend tax clientele theory. Finally, we observed changes in institutional investor clienteles consistent with the investor sorting effect. [ABSTRACT FROM AUTHOR]