This dissertation consists of two research papers examining the effects of investment income taxes on acquisition transactions and prices. I specifically examine the effect of such taxes on public to private transactions as well as the prices paid for target firms in cash-for-stock deals. In Chapter 2, I demonstrate that capital gains tax rates and dividend tax rates can have differing effects on acquisition premiums. Using the passage of the Taxpayer Relief Act of 1997 and the Jobs and Growth Reconciliation Relief Act of 2003, I empirically test the effect of capital gains taxes and dividend taxes on acquisition premiums. My results suggest acquirers tend to pay more for targets following a reduction in the capital gains tax rate in order to capitalize on higher after tax valuations of the target thus supporting the capitalization theory of taxation. However, targets are more likely to receive a lower acquisition premium from acquirers when the target was likely to payback shareholders in the future with dividends. My results also show that large dividend tax rate changes can offset the potential increase in acquisition premiums from a capital gains tax rate reduction. This paper makes an important contribution to the literature in documenting how and to what extent tax policy effects transaction prices. In Chapter 3, I provide the first empirical investigation of personal investment income tax effect on public firms' going private transactions. Using the Taxpayer Relief Act of 1997 and the Jobs and Growth Tax Relief Reconciliation Act of 2003, I find that personal investment income tax reduction increases the likelihood of public firms' going private. Cross-sectional analysis on acquirers with different tax sensitivity shows that the private equity (PE) participation increases the likelihood of public firms' going private more after tax cuts than without PE. I attribute this result to PE investors' increased incentive to capture the benefit of personal investment income tax reductions by taking public firms private. My findings demonstrate that personal investment income taxes and PE compensation structure in the form of carried interest have statistically and economically significant impact on public firms' going private transactions.