AI, Taxation, and Valuation

51 Pages Posted: 30 Apr 2022 Last revised: 8 May 2023

See all articles by Jay A. Soled

Jay A. Soled

Rutgers University

Kathleen DeLaney Thomas

University of North Carolina School of Law

Date Written: April 28, 2022

Abstract

Virtually every tax system relies upon accurate asset valuations. In some cases, this is an easy identification exercise, and the exact fair market value of an asset is readily ascertainable. Often, however, the reverse is true, and ascertaining an asset’s fair market value yields, at best, a numerical range of possible outcomes. Taxpayers commonly capitalize upon this uncertainty in their reporting practices, such that tax compliance lags and the IRS has a difficult time fulfilling its oversight responsibilities. As a by-product of this dynamic, the Treasury suffers.

This Article explores how tax systems, utilizing artificial intelligence, can strategically address asset-valuation concerns, offering practical reforms that would help obviate this nettlesome and age-old problem. Indeed, if the IRS and Congress were to take advantage of this new and innovative technological approach, doing so would bode well for more accurate asset valuations and thereby foster greater tax compliance. Put somewhat differently, in the Information Era in which we exist, it is simply no longer true that accurate asset valuations are unattainable.

Keywords: Tax, taxation, tax policy, artificial intelligence, machine learning, valuation, wealth tax, tax administration, tax compliance

JEL Classification: E62, H20, H21,H22, H24, H25, H26, H29, H30, K34, A12, K42, K34, O33, O35, O38, J38, J30

Suggested Citation

Soled, Jay and Thomas, Kathleen DeLaney, AI, Taxation, and Valuation (April 28, 2022). 108 Iowa Law Review 651 (2023), UNC Legal Studies Research Paper, Available at SSRN: https://ssrn.com/abstract=4095932 or http://dx.doi.org/10.2139/ssrn.4095932

Jay Soled

Rutgers University ( email )

1 Washington Park
Newark, NJ 07901-1825
United States
(973) 353-1727 (Phone)

Kathleen DeLaney Thomas (Contact Author)

University of North Carolina School of Law ( email )

Van Hecke-Wettach Hall, 160 Ridge Road
CB #3380
Chapel Hill, NC 27599-3380
United States
919-843-7630 (Phone)

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