Suchergebnisse

The classification of a financial instrument as "debt" or as "equity" is crucial in applying a wide range of income tax provisions. "Interest" expenses incurred on "debt," for example, are deductible in computing a firm's taxable income, whereas "dividends" paid on the firm's outstanding "equity" are not. "Interest" paid by a U.S. corporation to a foreign creditor is generally not subject to U.S. withholding taxes, whereas "dividends" paid on stock held by a foreign shareholder are typically subject to U.S. withholding taxes that range from 5% to 30% of the gross amount of the dividend paid. And the list goes on . . . . Not surprisingly, these disparities in tax treatment have inspired a plethora of schemes, many of them successful, designed to disguise equity investments as "debt." The urge to do so is perhaps nowhere more intense than in situations where the "debt" of a U.S. corporation is held by a foreign sister corporation located in a tax haven country. Interest paid or accrued on debt would be deductible in computing the U.S. corporation's U.S. taxable income, and would thereby permanently reduce the debtor's U.S. tax liability. The interest income earned by the foreign creditor would be exempt from both U.S. withholding taxes and income taxes in the foreign tax haven country. This interdisciplinary case was developed from the facts and circumstances before the U.S. Tax Court in litigation that resulted from the government's assertion that $975 million in "loans" made by a wholly owned Dutch subsidiary of Laidlaw Transit, Ltd. to several of Laidlaw's U.S. subsidiaries were in substance "equity." As in most debt-versus-equity cases, the stakes were high: Laidlaw's U.S. subsidiaries had deducted over $133 million of intercompany "payments" made to their Dutch sister corporation as "interest expense" and the IRS was suing to recover $52 million in back taxes (plus interest and penalties). This case integrates three disciplines – tax accounting, financial accounting, and finance -- in an easy-to-comprehend, yet rich setting appropriate for general management, finance, and accounting audiences. It invites students to thoroughly explore the substance-over-form doctrine as it applies to the debt-versus-equity issue, together with many of the tax, financial, accounting, and economic ramifications that flow from an instrument's classification. It also provides students with an opportunity to identify the ethical issues that attend the formulation and implementation of many tax minimization strategies and to identify factors that separate legal "tax avoidance" from criminal "tax evasion."

ABSTRACTThe scenario of established business sellers utilizing online auction markets to reach consumers and sell new products is becoming increasingly common. We propose a class of risk management tools, loosely based on the concept of financial options that can be employed by such sellers. While conceptually similar to options in financial markets, we empirically demonstrate that option instruments within auction markets cannot be developed employing similar methodologies, because the fundamental tenets of extant option pricing models do not hold within online auction markets. We provide a framework to analyze the value proposition of options to potential sellers, option‐holder behavior implications on auction processes, and seller strategies to write and price options that maximize potential revenues. We then develop an approach that enables a seller to assess the demand for options under different option price and volume scenarios. We compare option prices derived from our approach with those derived from the Black‐Scholes model (Black & Scholes, 1973) and discuss the implications of the price differences. Experiments based on actual auction data suggest that options can provide significant benefits under a variety of option‐holder behavioral patterns.

AbstractModels of population dynamics are frequently used in the management and conservation of wildlife populations. They provide a powerful method of quantitatively assessing a population's risk of decline and determining the potential to reverse the decline. Models from recent studies of managed populations are presented. The first model simulates the spectacled bear populations maintained in American Zoo and Aquarium Association (AZA) zoos. The second model simulates the grizzly bear population in the Greater Yellowstone Ecosystem (GYE). The article concludes with a discussion of system dynamics modeling in the larger context of population dynamics modeling. Copyright © 2004 John Wiley & Sons, Ltd.