John E. Karayan, Charles W. Swenson, and Joseph W. Neff, Strategic Corporate Tax Planning.
This book discusses tax planning from the perspective of a decision-making manager who has a limited formal tax background. The authors posit that tax planning should be about optimizing taxes rather than merely reducing taxes. They point out some of the inherent risk in strategic decisions made strictly for tax-savings purposes. The book describes a decision-making framework called SAVANT. This stands for Strategy, Anticipation, Value-Adding, Negotiating, and Transforming. This framework is used throughout the book when discussing tax-planning opportunities related to typical business transactions that occur during the life cycle of a business. The book consists of 15 chapters and two appendices. The chapters are organized into four main parts as described below.
Part One: "Understanding Strategic Tax Planning: A Framework"
This part consists of two chapters. The first chapter discusses the importance of tax planning and introduces the SAVANT decision-making framework. The second chapter discusses SAVANT in more detail and then illustrates the use of SAVANT by applying the framework to several different business transactions.
Part Two: "Forming the Enterprise"
This section consists of two chapters. Chapter 3 examines choice of entity issues and compares Partnerships, S corporations, C corporations, and LLCs. Chapter 4 discusses initial capitalization of the enterprise. This chapter compares and contrasts internal financing with different types of external financing. The comparison is made in the context of debt versus equity.
Part Three: "Operating the Firm"
Part three, consisting of eight chapters, is the longest subdivision within the book. This part starts, in Chapter 5, with a discussion of tax and nontax considerations associated with new product development and improvement of existing products. This chapter first considers R&D costs. This is followed by a discussion of the potential competitive advantage that one finn might have over another firm when tax positions are comparatively evaluated. This is followed, in Chapter 6, by a discussion of tax and nontax issues related to attracting and motivating employees. This chapter includes comparisons of various compensation packages. Chapter 7 looks at multistate operations from a market penetration perspective. This chapter outlines choice of location, sales and use tax, and tax abatement/incentive considerations. Chapter 8 continues the market penetration approach by focusing on operations in foreign markets. This chapter does not include a discussion of the current Extra Territorial Income (ETI) rules. Chapter 9 discusses production design, process selection, and capacity planning for ongoing operations. This includes inventory planning and inventory valuation issues. In Chapter 10, the focus moves to financing an ongoing business. This chapter contains a discussion of the tax and nontax factors associated with different financing options. Chapter 11 discusses capital budgeting in both a multistate and foreign environment. Chapter 12 presents a short but interesting discussion of internal planning based on analyses of competitors' segment reporting information and tax footnotes.
Part Four: "Changing Original Form"
This final three-chapter section of the book covers restructuring, mergers and acquisitions, and other topics dealing with modification of an existing form of doing business. Chapter 13 is dedicated to financial, business, and legal restructuring. Chapter 14 focuses on various issues related to mergers and acquisitions. Finally, Chapter 15 covers items such as flow-through entities, liquidations, buying a company for its assets, and bankruptcies.
I have used this book as the primary text in a M.B.A. elective course titled "Managerial Aspects of Taxation." This is a specialized course for M.B.A. students who do not have tax backgrounds. The book is readable and the topic coverage is sufficient for this type of class. The book contains numerous examples and several short case studies. The examples and case studies are both theoretical and real world. The book would also be suitable as a text or as a supplement in a tax elective class for accounting students who are not going to specialize in tax. In the M.B.A. class, I supplemented the book with additional case studies, a few articles, and some material from IRS publications. The book is not designed as a textbook in the traditional sense. This means that there are no instructor support materials.
The book is very readable, but some students found a couple of things to be distracting. First, there are mathematical mistakes in some of the examples. Second, the writing style will sometimes abruptly change. My guess is that the authors wrote different parts of the book and the parts were put together without an overall writing style edit. Several students found both of these items u little troublesome at first, but they soon adjusted.
The book offers students a perspective that is not often found in other tax materials. Tax literature sometimes ignores or diminishes the nontax aspects of a transaction. This book helps fill an existing gap in the tax literature by discussing both tax and nontax issues related to strategic planning. Discussing these issues together, in the same book, seems to be unique.
WRAY E. BRADLEY
University of Tulsa
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|Author:||Bradley, Wray E.|
|Publication:||Journal of the American Taxation Association|
|Date:||Mar 22, 2004|
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