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Articles 1 - 30 of 44
Full-Text Articles in Securities Law
Reconciling Tax Law And Securities Regulation, Omri Marian
Reconciling Tax Law And Securities Regulation, Omri Marian
University of Michigan Journal of Law Reform
Issuers in registered securities offerings must disclose the expected tax consequences to investors investing in the offered securities (“nonfinancial tax disclosure”). This Article advances three arguments regarding nonfinancial tax disclosures. First, nonfinancial tax disclosure practice, as the Securities and Exchange Commission (the SEC) has sanctioned it, does not fulfill its intended regulatory purposes. Currently, nonfinancial tax disclosures provide irrelevant information, sometimes fail to provide material information, create unnecessary transaction costs, and divert valuable administrative resources to the enforcement of largely-meaningless requirements. Second, the practical reason for this failure is the SEC and tax practitioners’ unsuccessful attempt to address investors’ heterogeneous …
The Redemption Puzzle, Reuven S. Avi-Yonah
The Redemption Puzzle, Reuven S. Avi-Yonah
Articles
After the adoption of partial integration in 2003, there has been only a modest rise in dividends, but a sixfold increase in redemptions. This article argues that the explanation for that lies in the different treatment of dividends and capital gains to foreign shareholders and that Congress should respond by making sections 302 and 304 inapplicable to foreign shareholders.
Enforcing Dividend Withholding On Derivatives, Reuven S. Avi-Yonah
Enforcing Dividend Withholding On Derivatives, Reuven S. Avi-Yonah
Articles
The United States imposes a 30 percent withholding tax on dividends paid to nonresident aliens. However, this tax is rarely paid by portfolio investors because they can swap into U.S. securities, receiving payments to match both capital gain and dividends. Treasury has ruled that swap payments have an origin in the taxpayer’s residence so there is no withholding obligation on payments that match dividends. The proposal would impose withholding tax on dividend equivalents on the ground that there is no policy justification for a distinction between dividends, substitute dividends under securities lending transaction (which are treated as dividends and are …
The Economic Impact Of Backdating Of Executive Stock Options, M. P. Narayanan, Cindi A. Schipani, H. Nejat Seyhun
The Economic Impact Of Backdating Of Executive Stock Options, M. P. Narayanan, Cindi A. Schipani, H. Nejat Seyhun
Michigan Law Review
This Article discusses the economic impact of legal, tax, disclosure, and incentive issues arising from the revelation of dating games with regard to executive option grant dates. It provides an estimate of the value loss incurred by shareholders of firms implicated in backdating and compares it to the potential gain that executives might have obtained through backdating. Using a sample of firms that have already been implicated in backdating, we find that the revelation of backdating results in an average loss to shareholders of about 7%. This translates to about $400 million per firm. By contrast, we estimate that the …
Stapled Securities--"The Next Big Thing" For Income Trusts? Useful Lessons From The Us Experience With Stapled Shares, Reuven S. Avi-Yonah, Tim Edgar, Fadi Shaheen
Stapled Securities--"The Next Big Thing" For Income Trusts? Useful Lessons From The Us Experience With Stapled Shares, Reuven S. Avi-Yonah, Tim Edgar, Fadi Shaheen
Articles
The Department of Finance has introduced two separate sets of legislation that together attempt to limit demand in the income trust market (though with very different revenue consequences). However, neither the proposed legislation nor the existing Income Tax Act contains an equity recharacterization rule. Consequently, the tax results associated with the standard income trust and royalty trust structures can still be realized with direct holding structures, in which the use of a trust as a pooling mechanism is eliminated and investors hold directly a combination of high-yield junk debt and a specified number of shares of the issuer. Until now, …
Back To The 1930s? The Shaky Case For Exempting Dividends, Reuven S. Avi-Yonah
Back To The 1930s? The Shaky Case For Exempting Dividends, Reuven S. Avi-Yonah
Articles
This article is based in part on the author’s U.S. Branch Report for Subject I of the 2003 Annual Congress of the International Fiscal Association, to be held next year in Sydney, Australia (forthcoming in Cahiers de droit fiscal international, 2003). He would like to thank Emil Sunley for his helpful comments on that earlier version, and Steve Bank, Michael Barr, David Bradford, Michael Graetz, and David Hasen for comments on this version. Special thanks are due to Yoram Keinan for his meticulous work on the EU regimes (see Appendix). All errors are the author’s. In this report, Prof. Avi-Yonah …
Stock Received In Lieu Of Salary By Stockholder-Employees Whose Proportionate Interest Remains Unchanged Is Taxable Income--Commissioner V. Fender Sales, Inc., Michigan Law Review
Stock Received In Lieu Of Salary By Stockholder-Employees Whose Proportionate Interest Remains Unchanged Is Taxable Income--Commissioner V. Fender Sales, Inc., Michigan Law Review
Michigan Law Review
Transactions involving forgiveness by stockholder-employees of corporate indebtedness are shrouded in legal uncertainty. The conflicting positions espoused by the Commissioner, the Tax Court, and the circuit court in the principal case focus attention on a few salient problems. The Commissioner, in arguing that the receipt of stock by the individual taxpayers constituted taxable income, considered the individuals solely as employees, believing it immaterial that they were also stockholders. Thus, he reasoned that when they, as employees, received stock in payment of their accrued salaries, they realized income. In contrast, the Tax Court viewed the individual taxpayers as stockholders who had …
Retention Of Control Over Stock Constitutes "Ownership" Under Section 1239 Of The Internal Revenue Code-Harry Trotz, Michigan Law Review
Retention Of Control Over Stock Constitutes "Ownership" Under Section 1239 Of The Internal Revenue Code-Harry Trotz, Michigan Law Review
Michigan Law Review
Petitioner set up a corporation, retaining seventy-nine per cent of the stock and -distributing the remainder to a third party. The third party borrowed from petitioner, pledging his stock as security and executing an option agreement under which the petitioner could recover the stock at any time. Subsequently, the newly organized corporation purchased all the depreciable assets of petitioner's proprietorship at a price in excess of their adjusted basis; petitioner reported the difference as a capital gain. The Commissioner declared a deficiency, relying on section 1239 of the Internal Revenue Code, which treats as ordinary income the gain recognized from …
The Solely-For-Voting-Stock Requirement In "B" Reorganizations Satisfied By Cash Payments For Fractional Shares-Mills V. Commissioner, Michigan Law Review
The Solely-For-Voting-Stock Requirement In "B" Reorganizations Satisfied By Cash Payments For Fractional Shares-Mills V. Commissioner, Michigan Law Review
Michigan Law Review
The Internal Revenue Code requires recognition of gains or losses realized upon a sale or exchange of property. An exception to this general rule is found in section 354(a)(1), the basic nonrecognition provision for stock-for-stock reorganizations. This section provides that a stockholder need not recognize gains or losses "if stock or securities in a corporation a party to a reorganization are, in pursuance of the plan of reorganization, exchanged solely for stock or securities in such corporation or in another corporation a party to the reorganization." However, before section 354 can be reached, the exchange must satisfy one of the …
Recovery Of Accrued But Unpaid Interest On War-Lost Investments Taxed As Capital Gain To Extent It Exceeds Basis-Horst V. United States, Michigan Law Review
Recovery Of Accrued But Unpaid Interest On War-Lost Investments Taxed As Capital Gain To Extent It Exceeds Basis-Horst V. United States, Michigan Law Review
Michigan Law Review
Prior to the United States entry into World War II, taxpayer acquired certain Japanese bonds. In December 1941, pursuant to section 127(a) of the Internal Revenue Code of 1939, he suffered a war loss with respect to these investments and took the proper deduction. When trading restrictions on Japanese bonds were lifted in 1950, taxpayer enjoyed a war loss recovery. At that time, bonds of this type were being traded flat, the quoted price reflecting both principal and accrued but unpaid interest thereon to the date of recovery. As the defaulted interest coupons were paid on their extended maturity dates, …
Taxation-Federal Income Taxation-Examination Of Certain Problems Under Section 335, Roger B. Harris S.Ed.
Taxation-Federal Income Taxation-Examination Of Certain Problems Under Section 335, Roger B. Harris S.Ed.
Michigan Law Review
Stock and securities of controlled corporations may be distributed to shareholders, tax free, in cases of corporate separations which qualify under section 355 of the Internal Revenue Code of 1954. A corporate separation is effected by the transfer of part of a corporation's assets to a subsidiary, the stock of which is distributed to the parent's stockholders. Such distributions are generally classified into three categories: spin-off, split-off, and split-up. A spin-off occurs when corporation A forms corporation B to which A transfers certain assets, receiving in exchange, the stock of corporation B. A then distributes the stock of …
Taxation- Federal Income Tax-Status Of Stock-For-Stock Exchange Where Boot Is Involved, Roger B. Harris S. Ed
Taxation- Federal Income Tax-Status Of Stock-For-Stock Exchange Where Boot Is Involved, Roger B. Harris S. Ed
Michigan Law Review
Taxpayer was the sole stockholder of International Dairy Supply Company. In 1952, Foremost Dairies, Inc. acquired from taxpayer all his stock in Supply Company in exchange for 82,375 shares of Foremast's common stock and 3,000,000 dollars cash. Taxpayer reported as gain from the transaction only the 3,000,000 dollars "boot" received, less allowable expenses. The Commissioner determined a deficiency of 278,823 dollars, asserting that the nonrecognition provision of the 1939 Code counterpart of section 356 (a) (1) was inapplicable and therefore taxpayer's entire gain realized on the disposition must be recognized. The Tax Court upheld taxpayer's contention that by virtue of …
Federal Taxation - Tax Aspects Of Corporate Buy And Sell Agreement, Joel D. Tauber S.Ed.
Federal Taxation - Tax Aspects Of Corporate Buy And Sell Agreement, Joel D. Tauber S.Ed.
Michigan Law Review
It is the purpose of this comment to consider the tax problems connected with both types of "conventional" corporate buy and sell agreements. It should be recognized, however, that there are many questions of local law and business necessity that also exert influence on the use of such agreements.
Bonds - Income Bonds - Rights Of Bondholders And Deductibility Of Interest For Federal Income Tax Purposes, Guy B. Maxfield S.Ed., Michael M. Lyons S.Ed.
Bonds - Income Bonds - Rights Of Bondholders And Deductibility Of Interest For Federal Income Tax Purposes, Guy B. Maxfield S.Ed., Michael M. Lyons S.Ed.
Michigan Law Review
An income bond is an obligation of a corporation on which interest is payable only out of earnings, as distinguished from the ordinary corporate bond on which interest is a fixed charge regardless of earnings. Long regarded as a hybrid security which is to be issued only as a last resort, income bonds have grown surprisingly in popularity over the past two decades. It is the purpose of this comment to consider the historical background of income bonds, to make a comparative analysis of the bond indentures as they affect investors' rights, and to consider the deductibility of income bond …
Taxation - Federal Income Tax - Secret Withdrawals Of Corporate Receipts By Stockholders As Income In Absence Of Surplus, Kenneth H. Haynie S.Ed.
Taxation - Federal Income Tax - Secret Withdrawals Of Corporate Receipts By Stockholders As Income In Absence Of Surplus, Kenneth H. Haynie S.Ed.
Michigan Law Review
As sole stockholder of the Robbins Tire and Rubber Company, the defendant managed and controlled the affairs of the corporation. Over a period of years he intercepted the company's receipts from several of its large customers and diverted them to his own use. No entries of such receipts were made on the books of the company, nor was any tax paid on them. Defendant was convicted for attempted evasion of his personal income tax on these funds. On appeal, held, affirmed. Taxation is concerned with actual command over property: If does not matter whether defendant got the funds as …
Taxation - Federal Income Tax - Treatment Of Gains From Commodity Futures Transactions Of Manufacturing Consumer, Neil Flanagin S.Ed.
Taxation - Federal Income Tax - Treatment Of Gains From Commodity Futures Transactions Of Manufacturing Consumer, Neil Flanagin S.Ed.
Michigan Law Review
Taxpayer, a manufacturer of products made from corn, purchased and sold corn futures contracts as a part of its regular buying program in order to protect itself against a possible shortage of raw materials. Taxpayer contended that the gains realized on these transactions should receive capital asset treatment. The Tax Court and the court of appeals held that the gains constituted ordinary income. On appeal, held, affirmed. The transactions, though not true hedges, were entered into for business purposes and as an integral part of taxpayer's operations. Consequently, they should be treated the same as hedges, and the gains …
Taxation - Federal Income Tax - Corporate Accumulations, Stock Dividends And The "Preferred Stock Bail-Out," And Taxability Of The Corporation Upon The Distribution Of "Inventory Assets" Under The Internal Revenue Code Of 1954, Alice Austin S.Ed.
Michigan Law Review
It is the purpose of this discussion to indicate, with respect to corporate accumulations and distributions, some of the major interpretative problems existing under the 1939 code which Congress has failed to resolve, as well as some of the major interpretative difficulties which arise for the first time under the 1954 code.
Taxation - Federal Income Tax - Extent To Which A Dividend In Kind Is Ordinary Income Under The Internal Revenue Code, Alice Austin S.Ed.
Taxation - Federal Income Tax - Extent To Which A Dividend In Kind Is Ordinary Income Under The Internal Revenue Code, Alice Austin S.Ed.
Michigan Law Review
Taxpayer, a corporate shareholder, received from the corporation a distribution of property which had appreciated in value over its adjusted cost. The earnings and profits of the corporation were sufficient to cover the adjusted cost of the property distributed, but were not sufficient to cover its full fair market value at the time of distribution. The Tax Court held that the fair market value of the distribution was taxable as a dividend only to the extent of the corporation's earnings and profits. On appeal, held, reversed. In determining whether a distribution in kind is a dividend under section 115(a), …
Taxation - Federal Income Tax - Exchange Of Debentures For Preferred Stock As Tax-Free Reorganization, Raymond R. Trombadore S.Ed.
Taxation - Federal Income Tax - Exchange Of Debentures For Preferred Stock As Tax-Free Reorganization, Raymond R. Trombadore S.Ed.
Michigan Law Review
Plaintiff held common and preferred stock of the Gulf States Paper Corporation. In 1942 plaintiff received new debentures in exchange for his preferred stock, pursuant to a plan for the recapitalization of the company whereby the entire 25,000 shares of previously outstanding preferred stock (including plaintiff's 208 shares) were exchanged for new debentures of like value. In 1950 the Commissioner assessed an income tax deficiency against plaintiff, determining that the redemption and cancellation of the preferred stock represented a distribution essentially equivalent to the distribution of a dividend and taxable under section 115(g)(1) of the Internal Revenue Code. Plaintiff sued …
Some Latter Day Developments In The Taxation Of Liquidating Distributions: Is The Cop Still On The Beat?, Willard H. Pedrick
Some Latter Day Developments In The Taxation Of Liquidating Distributions: Is The Cop Still On The Beat?, Willard H. Pedrick
Michigan Law Review
Redemption and salvation are doctrinal terms suggestive of the enthusiasm of the camp meeting. It is altogether fitting that these terms be used in connection with the taxation of corporate liquidating distributions. Through redemption of his stock the shareholder may find this world's nearest approach to fiscal salvation-taxation of his receipts on a capital-gains basis. To say the shareholder's enthusiasm for capital-gains treatment approaches a religious zeal is to underestimate the matter. Nor is it difficult to understand his attitude. If corporate earnings and profits, subjected at the outset to a relatively Hat but heavy corporate income tax, are paid …
Taxing Distributions Pursuant To Corporate Reorganizations, William M. Emery
Taxing Distributions Pursuant To Corporate Reorganizations, William M. Emery
Michigan Law Review
"Distributions" implies that we are concerned with the tax problems of the stockholder rather than those of the corporation. And while one corporation may be the stockholder of another, my emphasis will be primarily upon stockholders who are individuals, including, of course, trusts and estates who are taxed as individuals.
Employee Stock Options, Reece A. Gardner
Employee Stock Options, Reece A. Gardner
Michigan Law Review
The taxation to an employee of the difference between the fair market value of a share of stock transferred to him by a corporate employer, pursuant to the employee's exercise of an option to acquire it at a price below the value of the share, has for years been a matter of dispute between taxpayers and the Commissioner of Internal Revenue. This dispute has involved not merely, as in the case of many of the hardy tax perennials such as reasonableness of compensation, a question as to the application of facts to a well-defined principle of law, but rather a …
Taxation-Stock Dividends As Income, Joseph G. Egan S.Ed.
Taxation-Stock Dividends As Income, Joseph G. Egan S.Ed.
Michigan Law Review
X corporation had two classes of stock outstanding. The Class A stock was a preferred stock entitled to cumulative dividends and a liquidation preference. The Class B stock was a non-voting stock, entitled to an annual $2 dividend after payment of the dividend on the preferred. Both classes were entitled to participate equally (on a pro rata basis) in any dividends in excess of the two mentioned above. The corporation declared a stock dividend, entitling each Class A holder to one-half share of Class A stock for each share presently held, and each Class B holder to one-half share of …
Taxation--Income Tax--Nondeductible Losses--Intra-Family Transactions, Bayard E. Heath S.Ed.
Taxation--Income Tax--Nondeductible Losses--Intra-Family Transactions, Bayard E. Heath S.Ed.
Michigan Law Review
Petitioner managed his wife's as well as his own estate. On several occasions, to establish tax losses, he ordered his broker to sell certain stock on the Stock Exchange for his account, and then to buy the same number of shares of the same stock for his wife's account. Petitioner claimed losses derived from these sales when filing his income tax return, but the commissioner disallowed these deductions on the authority of section 24 (b) of the Internal Revenue Code. On the taxpayer's application to the Tax Court, it held section 24 (b) inapplicable. The circuit court of appeals reversed …
Taxation-Income Tax-Exempt Reorganizations-Recapitalization As Device For Distributing Earnings, Bayard E. Heath S.Ed.
Taxation-Income Tax-Exempt Reorganizations-Recapitalization As Device For Distributing Earnings, Bayard E. Heath S.Ed.
Michigan Law Review
Petitioner owned more than three-fourths of the stock in a corporation whose shares had a par value of $100. Except for one share, his wife owned the remainder. Under a plan of recapitalization the stockholders received in exchange for each old share, five shares of no par stock with a stated value of $60 per share plus a portion of $400,000 worth of callable debentures issued by the corporation. At the time of this exchange the earned surplus of the corporation exceeded $850,000. The commissioner held that the full value of the debentures received was chargeable to the taxpayer as …
Constitutional Law-Taxation-Gross Receipts Taxes In Relation To Interstate Commerce-Freeman V. Hewit, Irving Slifkin S.Ed.
Constitutional Law-Taxation-Gross Receipts Taxes In Relation To Interstate Commerce-Freeman V. Hewit, Irving Slifkin S.Ed.
Michigan Law Review
The scope of state taxation of interstate commerce has been redefined in two recent Supreme Court cases involving the application of state gross receipts taxes. In Freeman v. Hewit and Joseph v. Carter and Weekes Stevedoring Co., the Court discarded the cumulative burdens test, which for the past eight years had served as the basis for determining the extent of state taxation of interstate commerce, and readopted the direct and indirect burden test.
The Present Status Of Multiple Taxation Of Intangible Property, Robert C. Brown
The Present Status Of Multiple Taxation Of Intangible Property, Robert C. Brown
Michigan Law Review
The decision by the Supreme Court in 1932 of the case of First National Bank of Boston v. Maine represented the culmination of a fairly brief but apparently decisive effort by that Court substantially to do away with the taxation of intangible property by more than one state. Successive decisions within the three years previous had sought to do away with such taxation of debts ( no matter how evidenced) by more than one state; and First National Bank v. Maine laid down the same rule for corporate stock.
Taxation - Income Tax - Capital Gains - Cost Basis To Distributee, David N. Mills
Taxation - Income Tax - Capital Gains - Cost Basis To Distributee, David N. Mills
Michigan Law Review
Testator died in 1903, and the executors turned over the residue of his estate to themselves as testamentary trustees in 1905. In 1923, pursuant to the will, trustees delivered part of the original trust property, together with other property purchased with trust funds, to plaintiff, the equitable remainderman under the trust. In 1930 plaintiff sold some of the securities which had constituted the corpus of the trust. In determining the cost basis for the capital gains tax on this transaction, plaintiff claimed that the market value on the date when the trustees delivered the property to him in 1923 should …
Taxation - Income Tax - Inclusion Of Unpaid Dividends In Decedent's Income, Michigan Law Review
Taxation - Income Tax - Inclusion Of Unpaid Dividends In Decedent's Income, Michigan Law Review
Michigan Law Review
Decedent owned stock in a corporation whose board of directors declared a dividend on April 30, 1934, for the fiscal year ending January 31, 1935, payable to stockholders of record at such times and in such installments as the directors might determine. At the time of decedent's death, October 15, 1934, only one-half of the dividend had been paid to him, but the commissioner included in the gross income of the decedent for the taxable period prior to death the entire amount of the dividend declared. The Board of Tax Appeals reduced this amount to the portion of the dividend …
Taxation - Commerce Clause - Tax By Seller State On Contract To Sell Interstate, Walter B. Connolly
Taxation - Commerce Clause - Tax By Seller State On Contract To Sell Interstate, Walter B. Connolly
Michigan Law Review
Appellants were partners in the securities business with offices in New York City. In the course of their business they agreed to sell shares of stock to two firms, one engaged in business in Philadelphia, the other in Washington, D. C. The securities were mailed to banks in Philadelphia and Washington for delivery upon payment of sight drafts attached. Under the tax law of the state of New York, a tax was levied on the sale of this stock. Appellants sought a refund of the tax on the ground that the statute imposed an unconstitutional burden on interstate commerce. Held …