This paper investigates the role of managerial preferences in shaping corporate income tax evasion. Using noncompliance with the personal income tax as a measure of taste for evasion, the empirical results from a sample of corporate income tax returns show that managerial preferences play an important role in determining noncompliance with the corporate income tax. Basic sample tabulations show that, when compared to compliant firms, noncompliant firms are three times more likely to be managed by executives who have understated personal taxes. In addition, results from multivariate analyses suggest that the amount of underreported income is significantly higher in the presence of such executives.

In 2010, the U.S. estate tax expired and executors of wealthy decedents were not required to file estate tax returns. In the absence of the estate tax, beneficiaries received assets with carryover rather than stepped-up basis. Unrealized capital gains accounted for 44 percent of the fair market value of non-cash assets in estates that chose the carryover basis regime, and an even higher percentage for some asset categories. Many of the largest gains were on assets that had been held for at least two decades.

The authors examine survival rates of entrepreneurial enterprises and their growth, conditional on surviving. Their focus is on whether liquidity constraints increase the likelihood of entrepreneurial failure. The empirical strategy is based on the following logic: If entrepreneurs cannot borrow to attain their profit-maximizing levels of capital, then entrepreneurs with substantial personal financial resources will be more successful than those without. The authors examine the behavior of a group of sole proprietors who received substantial inheritances. The results are consistent with the notion that liquidity constraints exert a noticeable influence on the viability of entrepreneurial enterprises.

We examine why some individuals survive as entrepreneurs and others do not. In addition, we analyze the growth of entrepreneurial enterprises, conditional on surviving. Our focus is on the role of access to capital: To what extent do liquidity constraints increase the likelihood of entrepreneurial failure? The empirical strategy is based on the following logic: If entrepreneurs cannot borrow to attain their profit-maximizing levels of capital, then those entrepreneurs who have substantial personal financial resources will be more successful than those who do not. The data consist of the 1981 and 1985 federal individual income tax returns of a group of people who received inheritances. These data allow us to identify those individuals who were sole proprietors in 1981 and to determine the extent to which the decision to remain a sole proprietor was influenced by the magnitude of the inheritance-induced increase in liquidity. The results are consistent with the notion that liquidity constraints exert a noticeable influence on the viability of entrepreneurial enterprises. For example, a $150,000 inheritance increases the probability than an individual will continue as a sole proprietor by 1.3 percentage points, and if the enterprise survives, it receipts increase by almost 20 percent.