This book was written primarily for MBA students and graduates, specifically for those embarking on (or already in) careers in investment banking, corporate finance, strategy consulting, money management, or venture capital. Executives and finance professionals in such careers are typically not aiming to become tax specialists but do recognize the competitive advantage that comes from a solid understanding of the decision contexts that give rise to tax planning opportunities, how to integrate tax strategy into the bigger picture of corporate decision making, and the dramatic impact that changes in transaction structure can have on after-tax cash flows. Every top MBA program teaches its students the fundamentals of corporate finance, financial statement analysis and valuation, and investments. Every MBA graduate knows how to perform a discounted cash flow analysis and apply the NPV criterion--valuable skills, but not something that differentiates oneself. MBA programs historically have been deficient, however, at teaching their students about the pervasive role taxes play in decision making. Each of the authors has taught taxes and business strategy at the MBA level. Their courses have been, and are, uniformly popular at their respective institutions. Former students have reported back that they possess a competitive advantage over those MBA graduates who know little or nothing about tax strategy. The material in this book draws from and builds on the authors' classroom and business experiences, as well as the experiences of colleagues around the country, and is not duplicated in any other text. The book's MBA focus comes from integrating the tax law with the fundamentals of corporate finance and microeconomics. Through integration with traditional MBA topics, the book provides a framework for understanding how taxes affect decision making, asset prices, equilibrium returns, and the financial and operational structure of firms. Relative to legal-based tax books, this text focuses more on the economic consequences of alternative contracting arrangements than on the myriad details and exceptions of the tax laws governing the arrangements. It is not meant to imply that the details of the tax laws are unimportant; they certainly are important. In fact, students new to the tax law will find that this text provides them with significant tax legal knowledge in certain key areas where taxes play a big role in decision making and areas MBAs are likely to encounter in their careers (e.g., mergers and acquisitions, employee stock options, international tax). In addition, the book integrates tax with financial accounting by emphasizing differences and trade-offs between the taxation and the financial accounting of a transaction. CHANGES IN THE THIRD EDITION The text retains the same chapter and topic structure as the prior edition. Our objectives for the revision include: Updating the text to reflect major changes in the tax laws. Adding analyses of selected tax law changes. Replacing some old analyses with new more relevant analysis. Updating the lists of additional readings, which should be particularly useful to faculty and doctoral students. The financial accounting for corporate taxes is explained and illustrated in a new appendix to Chapter 2 for those wishing to relate tax planning to corporate financial statements. Discussion of College Savings Plans (529 plans) was added to Chapter 3. Chapter 4 (organizational form choice) was updated to reflect the new tax rates on dividends and capital gains. A discussion of corporate/individual tax integration using the Australian system as a vehicle for illustration was added as an appendix to this chapter. Additional material clarifying corporate marginal tax rates was added to Chapter 7. New material on restricted stock and employee stock options was added to Chapter 8. A new appendix explaScholes, Myron S. is the author of 'Taxes and Business Strategy A Planning Approach', published 2004 under ISBN 9780131465534 and ISBN 0131465538.