The Tax Effects of Stock Merger involving Individuals in Light of the Income Realization Principle

Abstract

The purpose of this paper is to analyze the income tax for individuals in the operation of merger of shares in view of the principle of realization of income. Implicit in the Federal Constitution, the principle of realization of income is one of the corollary principles of the principles of contributive capacity and equality, which aims to guarantee that income will be taxed at the time of realization. For this analysis, the prevailing understanding in the literature will be adopted as an assumption that, pursuant to Article 43 of the National Tax Code, for the occurrence of a taxable event of the income tax, it is necessary to acquire the economic or legal availability of income or earning of any nature, and the income is considered available when there is asset increase in equity determined on a cash basis and on an accrual basis.