Tax issues in petroleum-industry reorganization
Previous reorganizations in the oil industry have been merger waves driven by market power, tax, efficiency, and managerial motives. Current reorganizations have both efficiency and tax consequences. This article develops a model of the tax consequences of reorganizations through an explicit capital market model of valuation and tax effects. This is applied in detail to the royalty trust mode of reorganization. It shows how the value of reorganization is affected by the oil price and tax rates, as well as by firm or property-specific characteristics such as past profits, cost basis, and shareholder's tax class and stock basis. When the underlying asset appreciates, as happened with oil and gas in the 1970s and 1980s, the gain to reorganization increases. This analysis shows how the 1984 tax law changes the results. The approach also offers a method of valuing the tax effects of other potential industry reorganizations. 26 references, 2 figures, 1 table.
- Research Organization:
- Univ. of Texas, Austin
- OSTI ID:
- 6208351
- Journal Information:
- Energy J.; (United States), Journal Name: Energy J.; (United States) Vol. 6; ISSN ENJOD
- Country of Publication:
- United States
- Language:
- English
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CAPITAL
ECONOMIC IMPACT
EVALUATION
INDUSTRY
LEGAL ASPECTS
MANAGEMENT
MARKET
PETROLEUM INDUSTRY
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