Overview

Principles of Taxation for Business and Investment Planning is a unique approach to the subject of taxation. This text is designed for use in introductory tax courses included in either undergraduate or graduate business programs. The objective of this text is to teach students to recognize the major tax issues inherent in business and financial transactions. The text focuses on fundamental concepts, the mastery of which provides students with a permanent frame of reference for future study of advanced tax topics. Unlike traditional introductory texts, Principles of Taxation for Business and Investment Planning downplays the technical detail that makes the study of taxation such a nightmare for business students. Traditional texts are heavily compliance oriented and convince many students that the tax law is too complex and specialized to be relevant to their future careers. This text attempts to do just the opposite by convincing students that an understanding of taxation is not only relevant but critical to their success in the business world.

Principles of Taxation for Business and Investment Planning has its origin in the 1989 White Paper entitled Perspectives on Education: Capabilities for Success in the Accounting Profession, published jointly by the Big Eight public accounting firms. The White Paper expressed disenchantment with the narrow technical focus of undergraduate accounting curricula and called for scholastic emphasis on a broad set of business skills necessary for a lifetime of professional success. The Accounting Education Change Commission (AECC), operating under the aegis of the American Accounting Association, embraced the philosophy reflected in the White Paper. In September 1990, the AECC published its Position Statement No. One, entitled Objectives of Education for Accountants. This statement reiterated that an undergraduate business education should provide a base on which lifelong learning can be built.

In spite of these calls for reform, many undergraduate tax courses are taught in a traditional manner based on a paradigm developed four decades ago. In the modern (postwar) era of business education, the first generation of tax teachers were practitioners: accountants or attorneys hired as adjunct faculty to initiate students into the mysteries of the newly enacted Internal Revenue Code of 1954. These practitioners taught their students in the same way they trained their employees. In doing so, they created a compliance-oriented paradigm that has survived to the present day. In today's world, this traditional paradigm is an anachronism. Business students don't need to learn how to generate tax information. Instead, they must learn how to use tax information to make good business and financial decisions.

A New Paradigm for the Introductory Tax Course

Principles of Taxation for Business and Investment Planning provides a paradigm for meeting the educational needs of tax students in the twenty-first century. This paradigm is based on three postulates:

Postulate 1: Students should learn the tax law as an integrated component of a complex economic environment. Students should be aware of the role taxes play in financial and managerial decision making and should understand how taxes motivate people and institutions to engage in certain transactions or activities.

Postulate 2: Students should comprehend the tax law as an organic whole rather than as a fragmented collection of rules and regulations. This postulate dictates that students learn to apply the general tax rules rather than the myriad of exceptions that confuse rather than clarify the general rules. They should appreciate how the general rules apply to all taxpaying entities before they learn how specialized rules apply to only certain entities. Finally, they should learn how the law applies to broad categories of transactions rather than to a particular transaction.

Postulate 3: Students who learn fundamental concepts have a permanent frame of reference into which they can integrate the constant changes in the technical minutia of the law. The rapid evolution of the tax law results in a very short shelf life for much of the detailed information contained in undergraduate tax texts. Yet the key elements of the law-the statutory and judicial bedrock-do not change with each new revenue act passed by Congress. The student who masters these key elements truly is prepared for a lifetime of learning.

As a teacher with more than 25 years of experience, I know that traditional paradigms die hard and educational reform can be both painful and costly. Nevertheless, I also believe that change in the way college and university professors teach tax is both inevitable and extremely worthwhile. Our responsibility to our students is to prepare them to cope in a business world with little tolerance for outdated skills or irrelevant knowledge. My hope is that Principles of Taxation for Business and Investment Planning is a tool that can help us all fulfill that responsibility.