Special allocations, investment decisions, and transaction costs in partnerships

Article Abstract:

A linear model that posited an environment characterized by two tax treatments for income, in which individuals have different tax rates and partners can specifically allocate income, reveals that preferential tax treatment for income and individuals creates a demand for the formation of partnerships. Tax rates that create different classes of income and preferential treatment for taxpayers can be used by different partners to swap tax attributes to mutual advantage. Research indicates that recent changes in tax law will tend to decrease these effects, but because of a lower marginal tax rate for individuals over corporations under the Tax Reform Act of 1986, there will be an increase in entrepreneurs forming partnerships with corporations.

Investments

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Capital restructuring and accounting compliance costs: the case of publicly traded partnerships

Article Abstract:

A study examined the relationship between the capital market reactions to announcements of the formation of publicly traded partnerships (PTP) and the benefits and costs of PTP formation. Data on a sample of 45 firms and industry attributes were gathered. The attributes were employed to categorize the 45 sample firms according to the nontax benefits anticipated from capital restructuring. The attributes were also used to examine the link between group membership and market response to announcements of PTP formation. Findings revealed that the market places value on the nontax benefits and costs derived from capital restructurings in general as well as tax and control benefits related to PTP restructurings. Implications are discussed.

Accounting and auditing, Capital market, Capital markets, Capital assets, Capital formation

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A note on 'economically optimal performance evaluation and control systems': the optimality of two-tailed investigations

Article Abstract:

The cost variance investigation problem studied by Baiman and Demski (BD) (1980) is reexamined. Their model is further developed to optimize a 'two-tailed' investigations model with two non-HARA utility functions assumed. The BD models, the optimal investigation rules and investigation regions are investigated. The results show that it is possible to investigate both favorable and unfavorable cost variances.

Methods, Accounting, Functions, Exponential, Exponential functions

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