INTRODUCTION
THE BUSINESS RESEARCH YEARBOOK PUBLICATION PERSPECTIVES
Marjorie G Adams, Morgan State University Abbass F Alkhafaji, Slippery Rock University
The International Academy of Business Disciplines (IABD) is set to host its 18th Annual Conference in 2006, addressing significant challenges of the new millennium, including rapid technological advancements, market globalization, green marketing, and workforce diversity Educators and scholars must diligently work to confront these issues IABD aims to serve as a dynamic platform for identifying, discussing, and evaluating alternative solutions to these pressing challenges.
The International Academy of Business Disciplines (IABD) conferences are expanding, attracting scholars from diverse institutions worldwide, including small and medium-sized schools Notably, IABD operates as a volunteer organization with no paid staff, relying on dedicated volunteers committed to its goals The Academy serves as a unique international and interdisciplinary platform for professionals in business schools, communications programs, and social sciences to engage in meaningful discussions IABD aims to bridge the gap between theory and practice, enhancing public awareness of global business challenges and opportunities The conferences draw attendees, including scholars, corporate executives, and policymakers from over thirty business-oriented fields, with approximately 80% representing business schools IABD stands out for its embrace of interdisciplinary studies, and the quality of research presented continues to rise, with many top papers featured in the annual Business Research Yearbook.
The classification of the Yearbook's scholarship can often lead to confusion during annual evaluations and tenure or promotion decisions The Business Research Yearbook is designed to showcase innovative research and should not be mistaken for a mere proceedings publication Unlike typical proceedings, it is a refereed publication that holds an ISBN number and is registered with the Library of Congress, ensuring its credibility Additionally, it is included in Cabell’s Directory of Publishing, further emphasizing its significance in the academic community.
Opportunities in Management It is available for purchase by institutions and libraries
The publication selection process is stringent, with an acceptance rate of approximately 60% for submissions to BRY All papers presented at the IABD annual conference, except for special invited workshops, undergo a double-blind peer review, a standard practice among reputable academic organizations Following the reviewers' recommendations, the track chair has the authority to accept, reject, or request revisions for papers Once a paper is accepted for presentation, it becomes eligible for publication in the Business Research Yearbook.
ACCOUNTING THEORY
THE 28% CAPITAL GAINS TAX - AN ANTIQUE?
Annette Hebble, University of St Thomas hebble@stthom.edu
Nancy Webster, University of St Thomas webstern@stthom.edu
The rise of online platforms has led to a surge in transactions involving collectibles, yet tax regulations classify collectors as hobbyists, investors, or dealers without considering the ease of buying and selling in today's market The unfavorable long-term capital gains tax rate of 28 percent on collectibles, along with restrictions on losses and related expenses, often disadvantages collectors Consequently, it may be more beneficial for collectors to engage in sufficient activity to qualify as dealers with a profit motive, rather than facing investor taxation on profitable sales.
The collectibles market has transformed into a thriving industry, driven by factors such as easy access to online auction sites, the popularity of shows like Antiques Roadshow, and the investment needs of maturing baby boomers Once dominated by niche collectors and affluent patrons, this market now attracts a diverse range of enthusiasts and investors.
In 2003, for example, average Americans buying and selling merchandise on eBay alone, a large percentage of those items to hobbyists and collectors spent over two billion dollars
The Wall Street Journal highlighted a significant collectors’ boom in the art market, documenting a 15-year rise through a study of 50 diverse artists whose works saw frequent trading Notably, photographer Cindy Sherman experienced a remarkable 372% appreciation in her art over a decade, outpacing the Dow Jones Industrial Average's 179% growth during the same timeframe While the overall average gain for artists in the survey was 102%, it's important to note that the unprecedented rise of the Dow is unlikely to recur Additionally, despite the Jobs and Growth Tax Relief Reconciliation Act of 2003 reducing long-term capital gains tax rates, collectibles remain taxed at 28% The substantial gains observed in the art market over the past 15 years suggest that collecting art is a rewarding pursuit for those who find joy in owning and appreciating tangible assets.
Collectible objects can be categorized into three tiers based on their economic resilience during downturns The top tier consists of rare and unique items, such as old master paintings and flawless diamonds, which rarely appear on the market and retain or appreciate in value even during financial crises The second tier includes valuable but more common collectibles, like fine paintings and porcelains, which are frequently available and have less price stability; knowledgeable buyers often wait for prices to decline before purchasing The third tier encompasses faddish items that are heavily influenced by trends, as illustrated by the experience of a buyer whose modern artwork lost value when celebrity interest waned, leading to a lack of market support and little chance for price recovery.
Second and third level collectors can now easily gain expertise and profit from occasional sales or trades, thanks to a wealth of publications, articles, museum events, and online resources However, they often face challenges regarding the tax implications of their collecting activities, as the rules surrounding the taxation of collectibles are complex and subjective Without a demonstrated profit motive, collectors may find their expenses and losses limited Furthermore, there have been no new regulations from Congress or the IRS to address the increased accessibility of selling collectibles online, making it essential to review the existing tax rules that apply to these transactions.
According to Section 408(m)(2), collectibles encompass various items such as artwork, antiques, coins, stamps, and certain tangible personal properties held for over a year, with specific coin types excluded As a collectibles investor, it’s crucial to strategically manage your investments to maximize deductions, minimize tax on gains, and write off any losses Collectors can be classified as hobbyists, investors, or dealers, where hobbyists lack a profit motive, limiting their deductions to hobby income In contrast, investors and dealers, who demonstrate a profit motive, can fully deduct losses associated with their activities.
Determining whether an activity has a profit motive is a subjective decision Courts have established that enjoyment in running a business does not automatically categorize it as a hobby, as suffering is not a requirement for tax deductibility; in fact, success often stems from genuine interest (Jackson v Commissioner, 1972) According to Section 183 of tax law, an activity is deemed profit-seeking if it generates a profit in at least three out of the last five years, shifting the burden of proof from the taxpayer to the IRS If this profitability criterion is not met, the activity may still qualify as a business if the taxpayer can demonstrate an intent to engage in profit-seeking endeavors.
If the activity is deemed to be a hobby, the expenses must be deducted in the following order according to Section 1.67-1T(a)(1)(iv):
• Amounts deductible under other sections without regard to the nature of the activity, such as property taxes and home mortgage interest
• Amounts deductible under other sections if the activity has been for profit, but only if those amounts do not affect adjusted basis Examples include maintenance, utilities, and supplies
• Amounts that affect adjusted basis and would be deductible under other sections if the activity had been engaged in for profit Examples include depreciation, amortization and depletion
Hobby expenses can be deducted from adjusted gross income (AGI) as itemized deductions, but only if they exceed 2 percent of AGI If a taxpayer opts for the standard deduction instead of itemizing, all hobby-related losses are not deductible, although any income generated from hobby sales must still be reported on the tax return.
There are certain measures you can take to establish the earnestness of your business endeavor in an effort to avoid the hobby loss rules Some of them include:
• Maintain a businesslike attitude in all transactions
• Emphasize the profit potential of your collection or hobby rather than the pleasant or recreational aspects of it
• Any aspects of your collection or hobby that are personal and not for investment or profit, you should keep separate, with separate records, including separate checking accounts
• All transaction must be recorded and the records preserved
• Ask dealer contacts to make investment suggestions and note their suggestions
• Do not attempt to deduct literature that emphasizes the hobby aspect of your activity
• Do not use investment property for personal use (no collections, bought as an investment in the home)
• The greater your wealth, the harder it will be to prove profit and pleasure is the primary goal of your hobby or collection
• If all else fails and you are classified as a hobbyist, sell enough of your collection each year to pay for your maintenance expenses (Crumbley, 1981, 18-19)
To profit from collectibles, it's essential to adopt a dealer's mindset by purchasing items close to wholesale prices, while also thinking like a hobbyist to avoid fads and focus on steady long-term value increases Additionally, maintaining detailed records is crucial for minimizing tax losses In the event of a net loss, tax law allows for deductions across three specific categories, providing a safety net for collectors.
• Loss is incurred in a trade or business (applicable to dealers)
• Loss is incurred in any transaction entered into for profit (investor)
• Loss is not connected to a trade of business and arose form fire, storm, shipwreck, casualty, or theft (dealer, investor, or hobbyist)
If you've inadvertently purchased a counterfeit item for $1,800 that is only worth $100, the financial implications vary depending on your status as a dealer, investor, or collector Dealers and investors can deduct the loss upon sale, while collectors may claim a theft loss deduction in the year of purchase due to the lack of recovery prospects When collectors sell the counterfeit, the loss is treated as a capital loss, which can only be beneficial if there are sufficient long-term or short-term capital gains to offset it.
If you have adhered to business criteria and the IRS continues to seek your records, the Supreme Court has outlined specific behaviors that may suggest an intention to evade or defeat tax obligations, as noted in the IRS Manual 9.1.3.3.2.2.
• Keeping a double set of books
• Making false entries or alterations of invoices or documents
• Concealing assets or covering up sources of income
• The handling of one’s affairs to avoid making the records that is usual in transactions of the kind
• Any conduct, the likely effect of which would be to mislead or conceal
Many court cases related to collection violations often stem from serious collectors who genuinely believed they were entitled to deductions for expenses and losses linked to their collections, rather than involving overtly fraudulent activities.
The Wrightsmans sought to claim a tax deduction for expenses related to their collection activities, arguing that their efforts were for investment purposes, similar to the precedent set in the 1947 case of George F Tyler In that case, Tyler successfully deducted expenses and losses from his stamp collection, which was deemed an investment despite the IRS's assertion that he lacked genuine interest in stamps and primarily sought profit However, Tyler's victory was an exception in a lengthy history of profit versus pleasure cases, as most taxpayers have not fared well in similar disputes Ultimately, the Wrightsmans were unsuccessful in their claim.
Definitions of collectibles are often subjective and unclear, especially considering that past case law was established during a time when options for selling collectibles at fair value were limited This outdated perspective fails to reflect today's diverse methods of buying and selling various collectible items Modern collectors may incur additional costs related to advertising, shipping, and travel, raising questions about how these expenses align with the roles of hobbyists, dealers, or investors in the collectibles market.
Charles B Wrightman and Jayne Wrightsman v The United States, U S Court of Claims,
Crumbley, Larry; and Jerry Curtis Donate Less to the IRS The Vestal Press Ltd., 1981 G.F Tyler, 6 TCM 275, Dec 15,671 (M)
Internal Revenue Manual Attempt to Evade or Defeat Any Tax, Section 9.1.3.3.2.2.2
The Wall Street Journal, January 23, 2004
DOES THE IMPLEMENTATION OF SFAS NO 131 CONVEY USEFUL INFORMATION?
Yousef Jahmani, Kentucky State University Yousef.Jahmani@Kysu.Edu
This paper evaluates the information content of Statement of Financial Accounting Standards (SFAS) No 131, which mandates disclosures about enterprise segments A random sample of 111 companies from the Business Week Global 1000 list for 1997 was analyzed using dummy variable and analysis of covariance techniques The findings reveal that the implementation of SFAS No 131 does not provide statistically significant additional useful information It appears that investors and users may already have access to the information disclosed, or that managers can strategically withhold details that could be detrimental to the company while still benefiting investors and competitors.