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IRS Rulemaking: Drawing the Fine Line between Debt and Equity

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  • Reid H. Ewing

Abstract

The Internal Revenue Service has in the last year proposed a number of rules potentially damaging to small businesses. Perhaps the most damaging rule, as proposed initially, is one distinguishing for tax purposes between debt and equity contributions to a corporation's capital. The proposed rule would reduce the potential for tax abuse and litigation, but would also eliminate legitimate tax deductions claimed by small businesses in the past. The “debt-equity†rule is analyzed below, and refinements are proposed for IRS consideration. These refinements would moderate the adverse effects of this rule on small businesses without compromising its basic objectives.

Suggested Citation

  • Reid H. Ewing, 1981. "IRS Rulemaking: Drawing the Fine Line between Debt and Equity," Entrepreneurship Theory and Practice, , vol. 5(3), pages 46-52, January.
    • Handle: RePEc:sae:entthe:v:5:y:1981:i:3:p:46-52
    DOI: 10.1177/104225878100500308
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    Cited by:

    1. Justin R. Hall & Selen Savas-Hall & Eric H. Shaw, 2023. "A deductive approach to a systematic review of entrepreneurship literature," Management Review Quarterly, Springer, vol. 73(3), pages 987-1016, September.

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