Abstract This article replies in response to comments made to an empirical inquiry into the determination of dividend equivalence in stock redemptions. Since statistical tools incorporate and synthesize patterns developed in separate cases, they can often detect patterns which may not be readily observed by a descriptive analysis. While empirical techniques have been applied to a wide variety of tax and legal issues, they have taken two basic forms: hypothesis testing and identification of important variables. It is important to note that little or no emphasis has been placed on predicting future cases. The belief that statistical techniques cannot be adapted to complex areas of tax law ignores the valuable contributions of past empirical articles and dissertations. As this article has demonstrated, these studies are not intended to be used as predictive models of future cases but are designed to detect patterns often hidden by the complexity of the tax law. The authors believe that the results of their type of study can aid taxpayers in interpreting relevant judicial positions. The authors are of the views that the two forms of research, empirical and legal, complement each other. Consequently, traditional legal research is necessary in designing stock redemptions, but is not sufficient on its own.
Englebrecht et al. (Thu,) studied this question.