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The value of a flow-through entity in an integrated corporate tax system

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  • Edwards, Alexander
  • Shevlin, Terry
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    Abstract

    In an integrated corporate tax system, resident shareholders receive a tax credit for corporate tax paid that can be used to offset personal tax on dividend income. Nonresident and tax-exempt (pension plan) investors cannot use the tax credit on corporate dividends and thus prefer to invest in flow-through entities. We estimate the value of the flow-through entity to nonresident and pension plan investors by examining the price change around the date of an unexpected announcement of a change in tax law related to Canadian publicly traded income trusts units creating an entity-level tax that makes them no longer tax-favored to these investors.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Financial Economics.

    Volume (Year): 101 (2011)
    Issue (Month): 2 (August)
    Pages: 473-491

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    Handle: RePEc:eee:jfinec:v:101:y:2011:i:2:p:473-491

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    Web page: http://www.elsevier.com/locate/inca/505576

    Related research

    Keywords: Corporate tax integration Flow-through Entity Tax clienteles Implicit taxes;

    References

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    Cited by:
    1. Mishra, Anil V & Ratti, Ronald A, 2013. "Taxation of Domestic Dividend Income and Foreign Investment Holdings," MPRA Paper 50601, University Library of Munich, Germany.

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