An Empirical Inquiry into the Determination of Dividend Equivalence in Stock Redemptions: A Comment.

Abstract This article comments on an empirical inquiry into the determination of dividend equivalence in stock redemptions. It is a complex question and not the issue of this paper whether quantitative techniques can be adapted readily to the complex judgments of tax precedence and authorities. Certainly, no one would suggest that statistical methods should replace traditional tax research tools, but most acknowledge the significant value of many quantitative tax studies. However, in all likelihood, quantitative methods cannot economically or practically examine revenue rulings, regulations, or strong case law when the probability of success is near unity for conforming facts and possibly near zero for nonconforming facts. The E&R discriminant model may be one such attempt. The result is an array of confusing variables which generally do not capture factors which courts and practitioners routinely evaluate. A more traditional research approach based on all relevant sources including regulations, revenue rulings, and persuasive and controlling case law would probably have been more appropriate.