For MBA students and graduates embarking on careers in investment banking, corporate finance, strategy consulting, money management, or venture capital.

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.

Active Author Team

Mark Wolfson and Myron Scholes (who received the Nobel Prize for Economics for his work), Merle Erickson, Ed Maydew, and Terry Shevlin to lend their expertise to the fourth edition.  All 5 authors actively teach the tax and business strategy course and provide students with relevant examples from both classroom and real-world consulting experience.

Taxes: Rules and Regulations

All changes in the tax code are reflected throughout this text with extensive analysis of technical tax rules applied to corporate mergers and acquisitions.  Using both an algebraic and excel spreadsheet approach, the authors explain and analyze complex rules and transactions.

Practicality

This text teaches students the practical uses for business strategy.

• Accounting for income taxes and what outside analysts can learn about the firm's tax planning is discussed, enabling faculty to relate tax planning to corporate reports.
• Discussion on College Savings Plans (529s), which uses both an algebraic and excel spreadsheet approach to explain and analyze complex rules and transactions.
• Material on new tax rates on dividends and capital gains is covered in Chapter 4.

OTHER TOPICS OF DISTINCTION

• Appendix on corporate/individual tax integration using Australian system as vehicle for discussion.
• Explanatory material (Ch. 7) on estimating corporate marginal tax rates.
• Thorough analysis of equity-based compensation including, employee stock options and restricted stock (Ch. 8)
• Explains and illustrates the accounting for the corporate income tax benefits of employee stock options and how this impacts estimates of firms taxable income and marginal tax rates (Ch. 8, Appendix).
• Analyzes effect of recent dividend and capital gains tax rate changes on the organizational form choice-corporations versus flow through entities (Ch. 3).

Updated to Reflect Changes in Tax Laws

This edition contains several updated that reflect the most recent changes in tax laws:

• New! The financial accounting for corporate taxes is updated to include new disclosures under Financial Interpretation 48 (FIN 48) “Accounting for Uncertain Tax Benefits” in the appendix to chapter 2 for those wishing to relate tax planning to corporate financial statements.

• New! Discussion of new Roth 401(k) plans including a comparison to traditional 401(k) plans is added to Chapter 3.

• New! Chapters 10 and 11 (international tax) reflect the repeal of the Extraterritorial Income (ETI) regime, implementation of the domestic production activities deduction, reduction of the number of baskets for the foreign tax credit, increased discussion of tax havens, increased discussion of foreign partnerships, as well as numerous other changes to the area, particularly from the American Jobs Creation Act of 2004.

• New! Chapters 13-17 (mergers and acquisitions) are updated to reflect recent tax law changes and to reflect modifications in the financial accounting rules (GAAP) for mergers and acquisitions.  In addition, discussion of several actual deals in which tax benefits were substantial is added.

• New! Chapter 18 (estate and gift planning) is updated to reflect recent tax law changes.

OTHER TOPICS OF DISTINCTION

• New! An appendix is added to Chapter 4 (organizational form choice) discussing private equity funds and hedge funds as alternative equity investment vehicles.

• New! Updated discussion of the empirical evidence on the concepts discussed in chapter 6 on non-tax costs of tax planning.

• New! Chapter 7 adds material on the pervasiveness of tax losses by U.S. corporations and the distribution of carryforward periods which are important items for estimating corporate marginal tax rates.

• New! New graphs on restricted stock and employee stock options are added to Chapter 8.  Chapter 8 also includes a discussion of the revised required financial accounting for employee stock options, the tax consequences of backdating of employee stock options, and adds a table presenting how employee stock options are taxed to both the employee and the issuing employer firm in selected countries around the world.

Chapter 1          Introduction to Tax Strategy

Chapter 2          Tax Law Fundamentals

Chapter 3          Returns on Alternative Savings Vehicles

Chapter 4          Choosing the Optimal Organizational Form

Chapter 5          Implicit Taxes and Clienteles, Arbitrage, Restrictions, and Frictions

Chapter 6          Nontax Costs of Tax Planning

Chapter 7          The Importance of Marginal Tax Rates and Dynamic Tax Planning Considerations

Chapter 8          Compensation Planning

Chapter 9          Pension and Retirement Planning

Chapter 10        Multinational Tax Planning: Introduction and Investment Decisions

Chapter 11        Multinational Tax Planning: Foreign Tax Credit Limitations and Income Shifting

Chapter 12        Corporations: Formation, Operation, Capital Structure, and Liquidation

Chapter 13        Introduction to Mergers, Acquisitions, and Divestitures

Chapter 14        Taxable Acquisitions of Freestanding C Corporations

Chapter 15        Taxable Acquisitions of S Corporations

Chapter 16        Tax-Free Acquisitions of Freestanding C Corporations

Chapter 17        Tax Planning for Divestitures

Chapter 18        Estate and Gift Tax Planning