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

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...

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Bibliographic Details
Published in:Journal of accounting research 2003-03, Vol.41 (1), p.65-88
Main Authors: Enis, Charles R., Ke, Bin
Format: Article
Language:English
Subjects:
Accounting
Annual reports
Business structures
C corporations
Common carriers
Compensation
Corporate income tax
Corporate income taxes
Corporate tax planning
Corporate taxes
Dividends
Effects
Income distribution
Income shares
Income shifting
Income taxes
Insurance deductibles
Insurance industry
Liability insurance
Linear regression
Motor carriers
Rates of return
Shareholders
Statistical analysis
Stockholders
Studies
Tax base
Tax increases
Tax legislation
Tax planning
Tax rates
Tax reform
Tax revenues
Taxable income
Taxation
Trucking industry
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Summary: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% 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.
ISSN:0021-8456
1475-679X
DOI:10.1111/1475-679X.00096