Professor Petersen's Financial Strategy and Tax course (Finance 447) will use Canvas this quarter. Supplementary course materials and files can be found there. The current course syllabus can be found on the Kellogg syllabus respository.
Course Description. This course is intended to fill the gap between an MBA who is well trained in finance and the tax experts that you will rely on in your career (tax lawyers). The idea for the course came from alumni and recruiters who felt strongly that there was a gap in the knowledge of MBA's in their familiarity with importance of integrating tax issues into business and finance decisions. This course is designed to fill that gap. Your objective is not to develop the depth of tax knowledge that the tax professional has, but to be able to tap that knowledge and integrate it into the business decisions you will need to make. This course will teach you the logic and structure of tax codes (present, past, and future - U.S. and non-U.S.). More importantly, it will teach you how to apply this knowledge. You will learn how the structure of the tax code changes the financial decisions you will be expected to make: capital budgeting (investment decisions) and capital structure (financing decisions). You should view this class as an advanced corporate finance course (Finance III). I will teach you the basic sources of gains from tax planning and then illustrate the general principals with a number of examples and a few cases. Examples will be drawn from across the globe, since financial markets and thus the knowledge of tax efficient financial design is global. Although there are a myriad of techniques used in practice, there are just a few basic ideas underlying all tax-planning strategies.
Target Audience. Those students who will find the course most valuable go into general management (e.g. business development, private equity, and venture capital, treasury department of non-financials), banking (mergers & acquisitions and capital raising), security design/sales and trading (a huge fraction of security design is based in part on taxes - see Lecture 8), private wealth management (your clients care about taxes), and investment management (institutional sales). Unfortunately (or fortunately), this knowledge is scarece nd thus valuable. After Kellogg you will find few people in the room that know which tax issue to raise. You may also read the comments of past students.This is a scarce and thus a valuable skill.
Course Prerequisities. The prerequisites for the course are Corporate Finance (either Finance 440 or Finance 441). Since derivatives, specifically options, are a useful tool for creating synthetic securities and structures, you will see them used in many of the examples we discuss. Derivatives is useful but not required. I will provide you with a derivatives/options tutorial/refresher (you covered options in Finance 1 or ACF). It will focus on the subset of topics I need in this class and give you a chance to practice if you feel this is needed.
Not a Tax Law Course. I want to be very clear on what I will not teach you as what I will teach you. I will not teach you the tax code for the U.S. or any other country. This is not the point of the class and not your comparitive advantage. The details of the tax code changes very rapidly and thus, unless you plan on becoming an expert on the tax code (a tax lawyer), the details you learn will rapidly depreciate. I will show you many examples of US and non-US tax code. At the end of the class you should understand the fundamental features of all tax codes and how to use these in your business and financial decisions. If I am successful, there will be occasions (maybe many) where you will be the only one in the room asking the right questions. Our success has been good thus far.
Tax Cut and Jobs Act (2017). This legislation is one of the largest changes in the US tax code in decades. It is also a test of the design of this class. The purpose of the class is not to teach you the details of a specific tax code. Instead my objective is to teach you the structure of tax codes. That way when you can apply the logic to the details of the tax code in the country in which you are operating. If the tax code changes, as it did here and will again, you can rapidly adjust. Your knowledge isn't just the details. It is the structure. This means you will have to ask the right questions and ask the right people for help on the details and how they apply. Enclosed is my brief and evolving explanation and understanding of the major changes in the tax code. It is a link to a Word file. This way when I change it, the most recent copy is always available here. I ask that you not distribute this without my permission.
Intellectual Property
The class notes and past exams are the intellectual property of the instructor. You may not distribute class notes electronically or in any form to anyone outside the class or outside Kellogg. You may not duplicate these notes for use by your employers after graduating from Kellogg without my written consent.
Honor Code
I expect that the honor code will be followed at all times. I trust that no one will give or receive assistance which gives them an unfair advantage over other students.