USF St. Petersburg campus Honors Program Theses (Undergraduate)


Ed B. Bernal

First Advisor

James Fellows, Ph.D., CPA, Professor of Accounting, College of Business

Second Advisor

John. F. Jewell, M.Acc., JD, LLM, CPA, Director, Program of Accountancy


University of South Florida St. Petersburg

Document Type


Date Available

May 2014

Publication Date


Date Issued

April 2014


Loophole is a term that is often misused by politicians and the general public to criticize tax incentives such as the preferential capital gains tax rate and the charitable contributions deduction. This use of the term id imprecise because of the underlying implication that those using the law as it is intended are “cheating the system.” Most of these tax incentives are actually tax expenditures passed by the government to subsidize specific groups or activities. Because both tax expenditures and loopholes reduce the tax liability of their beneficiary legally, the line separating the two seems very thin. The purpose of this thesis is to end current misconceptions by examining the history, effects and future implications of both tax expenditures and actual tax loopholes, while drawing a defining line between the two. The ambiguity of certain cases will demand the use of reasonable judgment to infer whether a particular law is being exploited. Although the topic of tax loopholes has a significant role in the political arena, this thesis will avoid any political debate. As such, opinions regarding the effectiveness, viability or purpose of any particular tax laws will not be addressed, but they will be mentioned where relevant.


A thesis submitted in partial fulfillment of the requirements of the University Honors Program, University of South Florida St. Petersburg.

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