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This study examines whether there is a tax incentive for firms to engage in stock buybacks. Using methods previously established by Manzon (1994) and Scholes and Wolfson (1989), the results show that firms with high marginal tax rates are more likely to announce stock buybacks than firms with low marginal tax rates. Additionally, firms that announce stock buybacks have lower debt-equity ratios than firms that do not announce buybacks. Tax considerations do not appear to be a factor in the acquisition technique used, open market or tender offer. However, the tax motive and limited investment alternatives appear to be the major explanatory variables in the stock buyback decision.

Using attribution theory as a basis, this study increases the understanding of the tax preparer/client relationship by examining how tax return outcomes affect the level of responsibility that clients and nonclients place on tax preparers. This study also examines the impact of tax return outcomes on the continued use of the preparer. Attribution theory maintains that whether an event has a positive or negative outcome and whether an individual is directly involved in the event (i.e., an actor) or is an impartial third party (i.e., an observer) will affect where the individual places the responsibility (or cause) for the event. This study examines actors/clients' and observers/nonclients' responsibility assessments related to a tax deduction taken for positive (no IRS audit), negative (IRS audit with penalty and interest assessments), and mixed (IRS audit but the client's tax position is upheld) tax return outcomes. These responsibility assessments are examined across the taxpayers' initial beliefs concerning the tax deduction. The results are consistent with attribution theory. Actors/clients assigned more responsibility for the IRS audit to the tax preparer than did the observers/nonclients. For the no IRS audit situations, the actors/clients felt that they were more responsible for the positive outcome while the observers/nonclients gave the credit to an external factor, the tax preparer. In the mixed outcome situations, both the actors/clients and the observers/nonclients placed responsibility on the tax preparer. Overall, these results indicate that clients blame tax preparers for any tax return that is audited. This conclusion is further strengthened by the finding that in any situation where the client's return was audited, even with a positive audit outcome, both the actors and the observers were significantly less likely to retain the preparer in the future. The study also found that subjects' initial beliefs concerning whether to take an ambiguous tax deduction were not significant in the subjects' assignment of responsibility for the tax return outcomes in situations where an IRS audit occurred.