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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

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.

Suggested Citation

  • Edwards, Alexander & Shevlin, Terry, 2011. "The value of a flow-through entity in an integrated corporate tax system," Journal of Financial Economics, Elsevier, vol. 101(2), pages 473-491, August.
  • Handle: RePEc:eee:jfinec:v:101:y:2011:i:2:p:473-491
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    References listed on IDEAS

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    Cited by:

    1. Mishra, Anil V. & Ratti, Ronald A., 2014. "Taxation of domestic dividend income and foreign investment holdings," International Review of Economics & Finance, Elsevier, vol. 31(C), pages 218-231.
    2. repec:eee:finana:v:51:y:2017:i:c:p:54-68 is not listed on IDEAS

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