Tax reform in business combinations : Analysis of tax treatment in the United States: and selected foreign countries



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In recent years there has been an increase in the number of business combinations (mergers and consolidations) in the United States. This dissertation contains the results of a field study made concerning the tax problems of business combinations. The purpose of the research was to identify and evaluate the tax problems associated with the current tax provisions and then to suggest tax reform to correct those problems. The methodology employed by this study was to use anonymously completed questionnaires administered to a sample of tax specialists. The questionnaire required the respondents to evaluate on a seven point Likert scale the extent of thirteen tax problem areas in business combinations. Three of the problem areas were rated significantly higher than others by respondents. These were: 1. Net operating loss carryovers, 2. Earnings and profits carryovers, and 3. Amount taxable in a boot dividend. Although not statistically significant, the respondents indicated that six of the other problem areas evaluated might also be troublesome. These were: 1. The assumption of liabilities, 2. The provisions for determining if boot is taxable or nontaxable, 3. The lack of a formal definition of corporate equity, 4. Inventory method carryovers, 5. Reorganization expenses, and 6. Investment credit recapture. The other four items were not evaluated as problems to the respondents. These were: 1. Accounting method carryovers, 2. The lack of stock attribution rules, 3. Capital loss carryovers, and 4. Depreciation carryovers. The principal hypothesis of this study was that the current tax provisions concerning business combinations need reform. This hypothesis was supported by the research findings. Thus, the practical implication for this study is that Congress should address the problem of tax reform in business combinations. To help accomplish such tax reform, the primary problem areas have been identified and a starting point for Congressional action has been recommended.