TaxProf Blog

Sunday, May 9, 2004

Mitchell Kane (Virginia) has posted Strategy and Cooperation in National Responses to International Tax Arbitrage on SSRN. Here is part of the abstract:

International tax arbitrage may be loosely defined as a phenomenon in which an inconsistency in the substantive law of two or more jurisdictions yields a tax benefit that would not be available if the laws of the relevant jurisdictions were completely harmonized. Taxpayers engaging in international tax arbitrage may, for example, be able to duplicate valuable tax attributes, such as deductions or losses. Unlike instances of aggressive tax planning in which taxpayers push statutory tax provisions or judicial anti-abuse doctrines to their limits, international tax arbitrage typically involves cases in which the taxpayer is indisputably compliant with domestic law. Although the U.S. government has sought to eliminate such arbitrage opportunities in a number of instances, either through legislation or regulation, its policy reasons for attacking transactions in which taxpayers are fully compliant with the law have remained opaque. The literature on the subject has explored a number of possible justifications, ranging from the existence of implicit, though initially obscured, assumptions in domestic law to considerations of worldwide efficiency. A common strand running through this literature is the attempt to determine the problem that arbitrage transactions present. Once one has identified the problem, if any, the appropriateness of the governmental response can then be assessed. This article argues that rather than presenting a potential problem, international tax arbitrage may present governments with strategic opportunities to further their interests in the location and control of international investment….

Sunday, May 9, 2004

Yariv Brauner (Northwestern) has published A Good Old Habit, or Just an Old One? Preferential Tax Treatment for Reorganizations, 2004 B.Y.U. L. Rev. 1 (2004). A prior version is available on SSRN. Here is the abstract:

This article proposes to repeal the preferential tax treatment of certain merger and acquisition transactions known as “reorganizations,” and tax them like all other sales or exchanges. In the last 80 years this preference has been a cornerstone of our tax system. It is also one of the most stable rules in the tax code. Nevertheless, its normative justification is weak, and has never been rigorously debated in the legal literature. This article rejects the stated rationale for this rules – that such transactions trigger insufficient realization and therefore it is both unfair and impractical to currently tax them. It further demonstrates that the preferential tax treatment of reorganizations cannot be supported on efficiency grounds, applying the formerly unexploited (at least in the tax literature) wisdom available in the economic, business and corporate law literature. The latter conclusion is the primary contribution of this article.

Saturday, May 8, 2004

Alan Kennard (Ungaretti & Harris) has posted The Hedge Fund Versus the Mutual Fund on SSRN. Here is the abstract:

In determining whether to create, or invest in, a collective investment vehicle providing a risk arbitrage or other type of investment strategy, it is imperative that the major differences between a mutual fund and a hedge fund be understood. This article is a general summary of some of these major differences, with an emphasis on federal income taxation.