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Tax Depreciation and Risk

Strnad, Jeff (1991) Tax Depreciation and Risk. Social Science Working Paper, 765. California Institute of Technology , Pasadena, CA. (Unpublished)

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The theoretically ideal tax depreciation rule under an accretion tax is economic depreciation, a stream of deductions that replicates the decline in value of an asset over time. When the future value path of an asset is known in advance, the tax depreciation schedule should be based on the age-price profile for surviving assets. When the future value path of an asset is uncertain, this approach fails. A taxpayer can accelerate the statutory schedule by "strategic loss-taking." A series of special disposition rules (where each rule is combined with an adjustment in the ex ante depreciation schedule) address this problem, but each such rule has particular disadvantages. Finally, strategic loss-taking and rules designed to address it are particularly important in formulating a policy toward group accounting methods of depreciation.

Item Type:Report or Paper (Working Paper)
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Additional Information:I have benefited from comments received when earlier drafts were presented to the Los Angeles Tax Policy Group, Harvard Tax Policy Workshop, and workshops at Yale Law School and Stanford Law School. In addition, I am grateful for helpful comments outside of the workshop context from Bill Andrews, Ellen Aprill, Joe Bankman, Dick Craswell, Tom Griffith, Christopher Hanna, Louis Kaplow, Mark Kelman, Bill Klein, Michael Knoll, Ed McCaffery, David Mills, Eric Ramseyer, Roberta Romano, Matt Spitzer, Al Warren, and from various Treasury Department personnel. Finally, I am grateful for valuable comments and thorough research assistance from Bill Scarff. All errors are my own responsibility. Published as Strnad, Jeff. "Tax Depreciation and Risk." SMU Law Review, 52 (1999): 547-656.
Group:Social Science Working Papers
Series Name:Social Science Working Paper
Issue or Number:765
Record Number:CaltechAUTHORS:20170830-160444410
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:81001
Deposited By: Jacquelyn Bussone
Deposited On:30 Aug 2017 23:40
Last Modified:03 Oct 2019 18:37

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