Although the incidence of step-up transactions does not increase after the passage of the tax law, the results show that the structure of individual transactions is affected in an offsetting manner as a function of goodwill and other transaction intangibles. This study also provides evidence suggesting that inferences vary depending on how transactions are classified. In this analysis, goodwill deductibility is not a significant factor in determining the likelihood of transaction structure. These results suggest that transaction classification is important when examining the effect of tax provisions or attributes on divestiture structure. The paper derives the equilibrium profit sharing rule, output decision, and organizational form choice under each tax regime.
Joint ventures can create both private and social benefits by reducing production costs.
They can also create private benefits and social costs by reducing competition. Prohibitions or restrictions on joint ventures can either increase or decrease social welfare depending on whether the production cost effect or the competition effect is more important.