The Impact of the 1986 Tax Reform Act on Income Shifting from Corporate to Shareholder Tax Bases: Evidence from the Motor Carrier Industry

Posted: 16 Sep 2002

See all articles by Bin Ke

Bin Ke

National University of Singapore

Charles R. Enis

Pennsylvania State University - Smeal College of Business

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Abstract

Using a sample of privately held C corporations and S corporations from the motor carrier industry during 1984-92, we assess the effect of the 1986 Tax Reform Act on the amount of corporate income shareholders of privately held C corporations shifted to their personal tax bases. We estimate that the C corporations shifted a mean of $130,587 taxable income each year to shareholders (representing 29 percent of their mean accounting earnings before income shifting) after the 1986 tax law change. The C corporations used deductible managerial compensation and rent expense, but not interest expense, to shift income to shareholders.

JEL Classification: M41, M43, H25

Suggested Citation

Ke, Bin and Enis, Charles R., The Impact of the 1986 Tax Reform Act on Income Shifting from Corporate to Shareholder Tax Bases: Evidence from the Motor Carrier Industry. Available at SSRN: https://ssrn.com/abstract=329900

Bin Ke (Contact Author)

National University of Singapore ( email )

Mochtar Riady Building, BIZ 1, #07-30
15 Kent Ridge Drive
Singapore, 119245
Singapore
+6566013133 (Phone)

Charles R. Enis

Pennsylvania State University - Smeal College of Business ( email )

203 Beam Building
University Park, PA 16802
United States

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