Abstract

http://ssrn.com/abstract=989825
 
 

Footnotes (68)



 


 



Tax Shelters, Dutch Books, and the Fundamental Theorem of Asset Pricing


Terrence R. Chorvat


George Mason University School of Law


Virginia Tax Review, Forthcoming
George Mason Law & Economics Research Paper No. 07-21

Abstract:     
Because the tax law makes many distinctions not based on fundamental economic differences, taxpayers can exploit these inconsistencies to create opportunities for tax arbitrage. This article argues that any interpretative system which requires consistency in the application of rules where the system itself is based on fundamental inconsistencies will always allow for arbitrage. This result applies equally to purposive interpretations of the tax law as well as to more formal or literal systems of interpretation. That is, the problem of tax arbitrage is concomitant with the existence of non-economic principles of tax law embedded in a system that interprets these rules in a consistent manner. While this idea has been applied to questions of whether a tax system can impede the ability of the economy to reach equilibrium, it has not been applied to the legal analysis of tax shelters themselves. The result of this line of reasoning is that tax shelters are the inevitable result of any tax system with inherent inconsistencies which attempts to bring an artificial consistency to these non-economic based distinctions. The article goes on to argue that one of the methods by which tax shelters are addressed by the courts is the use of inconsistent methods of applying the law to these transactions.

Number of Pages in PDF File: 27

Keywords: tax shelter, economic substance, tax arbitrage, Dutch book, taxation - federal income

JEL Classification: H20, H25, H26, K34

Accepted Paper Series





Download This Paper

Date posted: May 31, 2007  

Suggested Citation

Chorvat, Terrence R., Tax Shelters, Dutch Books, and the Fundamental Theorem of Asset Pricing. Virginia Tax Review, Forthcoming; George Mason Law & Economics Research Paper No. 07-21. Available at SSRN: http://ssrn.com/abstract=989825

Contact Information

Terrence R. Chorvat (Contact Author)
George Mason University School of Law ( email )
3301 Fairfax Drive
Arlington, VA 22201
United States
703-993-8208 (Phone)
Feedback to SSRN


Paper statistics
Abstract Views: 713
Downloads: 151
Download Rank: 117,288
Footnotes:  68

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo3 in 0.985 seconds