Abstract This article presents response from the author to the comments on his article "Behavioral Implications of Taxation," published in the October 1973 issue of the journal "The Accounting Review." It was argued that the author's article did not always maintain a clear distinction between ex ante and ex post research. This issue is basically a semantical difference. The author agrees that behavioral research can be ex ante and ex post. Many specific research methodologies incorporate both ex ante and ex post research. There is no way to know what are the best paths to follow as the body of knowledge is being developed. Tax analysis research would, of course, include both ex post and ex ante research. The 1973 AAA's Committee on Federal Income Taxes indicates that tax research consists of two types: tax compliance and planning research and tax analysis research. The first type refers simply to finding a competent and professional conclusion to a tax problem. It includes such subsets as tax return preparation or review, tax minimization and deferral, and practice before the U.S. Internal Revenue Service and the Tax Court. The second type of research goes beyond this fact-oriented research and focuses upon the data-gathering stage in the testing of tax hypotheses.

Abstract The article argues that behavioral implications should be considered in the formulation of tax law and policy in the United States. The income tax policy of the United States has many objectives including raising revenue, encouraging economic growth, stabilizing the economy, redistributing income and wealth and encouraging certain industries. Although taxation does influence human behavior, most tax laws are enacted without adequate consideration of their behavioral effects. A person on welfare cannot better himself by working unless he can get off welfare altogether. Proponents of the negative income tax, both conservatives and liberals, indicate that under a negative income tax system the individual's payments would not be reduced dollar-for-dollar as earnings rise. The households were drawn from a stratified sample of eligible households and were assigned to either an experimental or control group. An increase in income has had little impact on family stability. The power of incentives and disincentives is enormous. They may be used to safeguard or to exploit, to subsidize one interest or to destroy another, to simplify administration or to confuse it. Taxation does influence human behavior, but the important thing is to learn which provisions influence behavior in what way-- and whether the resulting behavior is that which is desired.

Abstract This article presents a reply to the comments made by professor Tsvi Ophir to the author's article on gift tax computation. The author was trying to show that the decision to make a gift is determined by how long the individual is expected to live. It was stated clearly that the property did not appreciate or depreciate during the period of time between the date of gift and date of death of the donor. Thus, in his example the estate tax of $150,000 remained the same whether the individual lived five more years or ten years. What did change, however, was the fact that the taxpayer who elected not to make the gift has the use of the funds in his estate for five additional years. Present value refers to the broad area of time value of money. To be more precise he was attempting to incorporate the concept of time value of money into the problem under consideration. bracket. But the gift tax rate schedule is progressive in nature. As more and more gifts are made, the donor moves into a higher and higher gift tax bracket. After a point the individual's gift tax bracket may become higher than his estate tax bracket.

Abstract This article discusses the use of probabilities and present value analysis in the taxation of lifetime gifts in the U.S.. Probabilities and present value analysis are used frequently in accounting literature and solutions to accounting problems. In the teaching of tax accounting, however, both the use of probabilities and present value analysis has received limited acknowledgement. Teachers should devise tax problems that will lead students to consider both of these concepts when working tax problems. Assume that a discount rate of 5 percent is adequate and that the property does not appreciate or depreciate during the period of time between the date of gift and date of death of the donor. Further, life expectancy data is obtained from actuarial tables provided by the Treasury Department. But the gift and estate taxes are often not the only tax considerations, for the income tax may be an important variable. If the gift property is income-producing property, there can be a sizeable overall income tax saving if the donee is in a lower income tax bracket than the donor.

Abstract Decision tree, critical path or logical fan notations are becoming more and more recognized as useful tools for communicating complex issues. This is particularly true as the current generation of students matures with some introduction to these techniques, as well as to computer flow-charting and programming, which is but another notation of the same logical approach. Taxation, of course, offers numerous complex concepts, the teaching of which can be greatly aided by logical diagrams. One wonders why complex sections of the law itself are not defined in such a manner instead of in the traditional legalistic gobbledygook. The use of such diagrams for, as one example, child and disabled dependent care expense deductions either as a transparency projection or as a mimeographed handout can greatly improve the communication problems in taxation lectures. The diagram in this article has been used successfully in presenting this complex personal deduction. According to the diagram as represented in the article, a man is a widower if his wife has died and he has not remarried, he is divorced and has not remarried, or he is legally separated from his wife under separation decree. A wife is incapacitated if she is either mentally or physically incapable of taking care of herself or institutionalized for at least 90 consecutive days or until her death, if earlier.

Abstract Treasury task force, which overhauled the regulations, attempted and succeeded in narrowing the gap between consolidated income tax reporting and consolidated reporting for financial statement purposes. The purpose of this article is to discuss some of the major changes and point out how these new regulations narrow the taxable and accounting income gap for consolidations. The "one entity" concept was not accepted "in toto" by the drafters of the new rules. Accordingly, the new regulations do not accept the historical Congressional interpretation that separate, legal corporations, should not obscure the fact that an affiliated group is a single corporation owned by the same individuals and operated as one unit. A series of computations and sub-computations are necessary whenever one undertakes the preparation of the consolidated return and the computation of the consolidated tax liability. A logical starting point is to determine, in accordance with the consolidated return rules, the separate taxable incomes of each member of the affiliated group. The first step is to compute separately for each member of the group all items of income or deductions in substantially the same manner as if separate returns were filed.

Abstract Reviews the book "A Tax Guide for Artists and Arts Organizations," edited by Herrick K. Lidstone.

Abstract Discusses a possible use of Human Resource Accounting for tax purposes in a service-related firm. Method of optimizing the distribution earnings in a closely held corporation; Standard format for determining the reasonable working capital needs for a corporation; Application of the mathematical Bardahl formula in the case Simons-Eastern Co. v. U.S.; Human Resource formula for service organizations.

Abstract Reviews the book "Valuing a Company: Practices and Procedures," by George D. McCarthy and Robert E. Healy.

Abstract Reviews two books on taxation. "Analysis of the Tax Reform Act of 1969," edited by Gilbert Simonetti, Jr. and Harry Z. Garian; "Working With the Revenue Code--1971," by Don J. Summa.