Scandinavian Working Papers in Economics

Working Papers,
Copenhagen Business School, Department of Finance

No 2002-1: On valuation before and after tax in no arbitrage models: Tax neutrality in the discrete time model.

Bjarne Astrup Jensen
Additional contact information
Bjarne Astrup Jensen: Department of Finance, Copenhagen Business School, Postal: Department of Finance, Copenhagen Business School, Solbjerg Plads 3, A5, DK-2000 Frederiksberg, Denmark

Abstract: We establis necessary and sufficient conditions for a linear taxation system to be neutral - within the multi-period discrete time "no arbitrage" model - in the sense that valuation is invariant to the exact sequence of tax rates, realization dates as well as immune to timing options attempting to twist the time profile of taxable income through wash sale transactions.

Keywords: Tax neutrality; mark-to-market valuation; generalized linear taxation schemes; wash sales

JEL-codes: G12; G13; H20

26 pages, March 6, 2002

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