Abstract
In August of 1981 the Economic Recovery Tax Act (ERTA) was signed into law. A purpose of ERTA was to enhance motivation for investment. In September of 1982 the Tax Equity and Fiscal Responsibility Act (TEFRA) was signed into law. TEFRA was passed in response to concerns that ERTA might have gone too far in reducing taxes. Entrepreneurial investment in conventional apartments can be manifested through either the regular corporation or general partnership forms. Investment through either was affected by both ERTA AND TEFRA. The purpose of this research study is to analytically examine the impact of ERTA and TEFRA on conventional apartment investment through the corporate and partnership forms. Researcher-constructed computer income-tax valuation models are constructed. The models accept representative investment and investor data to generate 1,440 after-tax internal rates of return (ATIRR's). Four hundred and eighty investment scenarios are considered. The ATIRR's are examined for purposes of testing three research hypotheses. It is concluded that the mean ATIRR's generally increase as a function of the holding period of the investment. Further, it is concluded that while ERTA provided for an increase in mean ATIRR's, TEFRA caused a cutback in this increase. Additionally, it is concluded that ATIRR's available through the general partnership form are consistently larger than ATIRR's for similar investments through the regular corporate form. Finally, it is concluded that the level of the annual depreciation charge, the level of the amount of investment, and the level of the debt/equity ratio all act to generate different ATIRR's.
Dickens, Thomas L. (1983). Effects of 1981 and 1982 tax legislation on conventional apartment investment through the corporate and partnership forms. Texas A&M University. Texas A&M University. Libraries. Available electronically from
https : / /hdl .handle .net /1969 .1 /DISSERTATIONS -399778.