Taxes and Business Strategy : A Planning Approach

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  • Edition: 3rd
  • Format: Paperback
  • Copyright: 2005-01-01
  • Publisher: Prentice Hall
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This book takes an MBA style strategy perspective by considering the tax, accounting, and finance trade-offs involved in tax planning. Reflected in this revision are all changes in the tax code.Also covered: extensive analysis of technical tax rules applied to corporate mergers and acquisitions; explanation of accounting for income taxes; discussion on College Savings Plans (529s); up-to-date material on new tax rates on dividends and capital gains; and much more.For individuals furthering their personal or formal education of tax strategy, investment banking, corporate finance, strategy consulting, money management, or venture capital.

Table of Contents

Introduction to Tax Strategy
Tax Law Fundamentals
Returns to Alternative Savings Vehicles
Choosing the Optimal Organizational Form
Implicit Taxes and Clienteles, Arbitrage, Restrictions and Frictions
Nontax Costs of Tax Planning
The Importance of Marginal Tax Rates and Dynamic Tax-Planning Considerations
Compensation Planning
Pension and Retirement Planning
Multinational Tax Planning: Introduction and Investment Decisions
Multinational Tax Planning: Foreign Tax Credit Limitations and Income Shifting
Corporations: Formation, Operation, Capital Structure and Liquidation
Introduction to Mergers, Acquisitions and Divestitures
Taxable Acquisitions of Freestanding C Corporations
Taxable Acquisitions of S Corporations
Tax-Free Acquisitions of Freestanding C Corporations
Tax Planning for Divestitures
Estate and Gift Tax Planning
Table of Contents provided by Publisher. All Rights Reserved.


This book was written primarily for MBA students and graduates, specifically for those embarking on (or already in) careers in investment banking, corporate finance, strategy consulting, money management, or venture capital. Executives and finance professionals in such careers are typically not aiming to become tax specialists but do recognize the competitive advantage that comes from a solid understanding of the decision contexts that give rise to tax planning opportunities, how to integrate tax strategy into the bigger picture of corporate decision making, and the dramatic impact that changes in transaction structure can have on after-tax cash flows. Every top MBA program teaches its students the fundamentals of corporate finance, financial statement analysis and valuation, and investments. Every MBA graduate knows how to perform a discounted cash flow analysis and apply the NPV criterion--valuable skills, but not something that differentiates oneself. MBA programs historically have been deficient, however, at teaching their students about the pervasive role taxes play in decision making. Each of the authors has taught taxes and business strategy at the MBA level. Their courses have been, and are, uniformly popular at their respective institutions. Former students have reported back that they possess a competitive advantage over those MBA graduates who know little or nothing about tax strategy. The material in this book draws from and builds on the authors'' classroom and business experiences, as well as the experiences of colleagues around the country, and is not duplicated in any other text. The book''s MBA focus comes from integrating the tax law with the fundamentals of corporate finance and microeconomics. Through integration with traditional MBA topics, the book provides a framework for understanding how taxes affect decision making, asset prices, equilibrium returns, and the financial and operational structure of firms. Relative to legal-based tax books, this text focuses more on the economic consequences of alternative contracting arrangements than on the myriad details and exceptions of the tax laws governing the arrangements. It is not meant to imply that the details of the tax laws are unimportant; they certainly are important. In fact, students new to the tax law will find that this text provides them with significant tax legal knowledge in certain key areas where taxes play a big role in decision making and areas MBAs are likely to encounter in their careers (e.g., mergers and acquisitions, employee stock options, international tax). In addition, the book integrates tax with financial accounting by emphasizing differences and trade-offs between the taxation and the financial accounting of a transaction. CHANGES IN THE THIRD EDITION The text retains the same chapter and topic structure as the prior edition. Our objectives for the revision include: Updating the text to reflect major changes in the tax laws. Adding analyses of selected tax law changes. Replacing some old analyses with new more relevant analysis. Updating the lists of additional readings, which should be particularly useful to faculty and doctoral students. The financial accounting for corporate taxes is explained and illustrated in a new appendix to Chapter 2 for those wishing to relate tax planning to corporate financial statements. Discussion of College Savings Plans (529 plans) was added to Chapter 3. Chapter 4 (organizational form choice) was updated to reflect the new tax rates on dividends and capital gains. A discussion of corporate/individual tax integration using the Australian system as a vehicle for illustration was added as an appendix to this chapter. Additional material clarifying corporate marginal tax rates was added to Chapter 7. New material on restricted stock and employee stock options was added to Chapter 8. A new appendix explaining and illustrating the accounting for the income tax benefits received by corporations on employee stock options was added to Chapter 8, with discussion of how this accounting affects estimates of corporate taxable income and marginal tax rates. Chapters 10 and 11 (international tax) reflect the repeal of the Foreign Sales Corporation and provide discussions of the current controversies over export subsidies and corporate inversion transactions. Chapter 12 primarily reflects the 2003 changes in dividend taxation and changes in the accounting treatment of trust preferred stock. Chapters 13-17 (mergers and acquisitions) were updated to reflect tax law changes and the change in the financial accounting rules for mergers and acquisitions where the pooling method of accounting is no longer allowed and goodwill is no longer amortized. Chapter 18 (estate and gift planning) was updated for the major changes in estate and gift taxation that were enacted in 2001 and are being phased-in over the decade.

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