Law Commons^™

Common Sense Recommendations For The Application Of Tax Law To Digital Assets, Linda M. Beale, Jeremy Bearer-Friend, Jennifer Bird-Pollan, Samuel D. Brunson, Luís Calderón Gómez, Bryan Camp, Adam Chodorow, Mark Cochran, Lin William Cong, Matthew Foreman, Phil Gaudiano, I. Richard Gershon, Nathan C. Goldman, Jillian Grennan, Megan Justice, Young Ran (Christine) Kim, Herbert I. Lazerow, Tao Li, Lawrence Lokken, Omri Y. Marian, Orly Mazur, Stephanie Hunter Mcmahon, Tyler Menzer, Matt Metras, Ann M. Murphy, Henry Ordower, Amanda Parsons, Daniel Rabetti, Alex Raskolnikov, Tracey M. Roberts, Kerry A. Ryan, Edward A. Zelinsky

All Faculty Scholarship

In response to the Joint Committee on Taxation’s July 2023 request for comments on application of various Internal Revenue Code sections on digital assets, we propose a consistent set of rules to apply current law to digital assets. We highlight that the underlying economics and characteristics of transactions should be the primary concern for the application of rules and the valuation of digital assets. We believe any digital asset rules should (1) treat classes of digital assets with unique characteristics differently based on their economics, (2) minimize incentives for users to engage in tax-motivated structuring of transactions, and (3) allow …

Tax Treatment Of Legal Fees Under 2017 Tax Cuts And Jobs Act, Fred B. Brown

All Faculty Scholarship

This article describes the deductibility of legal fees for federal income tax purposes after the 2017 Tax Cuts and Jobs Act, and provides a recommendation for reforming the current rules.

Merger Is Indirect Gift In Cavallaro, Kerry A. Ryan

All Faculty Scholarship

In Cavallaro v. Commissioner, the Tax Court held that a merger of two family-owned businesses resulted in a substantial taxable gift. The taxpayers avoided penalties by demonstrating that they relied in good faith on the mistaken advice of competent tax advisers.

Flp Loss, But Crummey Win, Wendy G. Gerzog

All Faculty Scholarship

In Turner the Tax Court determined that section 2036 applied to the decedent’s transfers of assets to his family limited partnership but that the insurance premiums he paid indirectly to his insurance trust qualified for the annual exclusion.

Human Capital And Transfer Taxation, Kerry A. Ryan

All Faculty Scholarship

This article addresses the question of whether education and healthcare transfers should be included in the federal gift tax base. It initially frames the issue in two ways: (1) through the lens of a proposal by the American Law Institute to exempt all “transfers for consumption” from gift taxation, and (2) within the context of a debate among economists about whether such expenditures should be included in the definition of “intergenerational transfers” for purposes of determining the total share of such transfers in U.S. accumulated wealth. Finding the first lens unsatisfactory on its own doctrinal terms and the second lens …

Determining The Character Of Section 357(C) Gain, Fred B. Brown

All Faculty Scholarship

Under section 351, a person transferring property to a controlled corporation generally recognizes no gain or loss on the transaction. An exception to tax-free treatment is contained in section 357(c), which generally provides that a transferor in a section 351 transaction recognizes gain to the extent that any liabilities assumed by the corporation on the transfer exceed the transferor's aggregate adjusted basis in the assets transferred. An issue under section 357(c) is whether the recognized gain should be capital gain or ordinary income. The statute suggests that the character of section 357(c) gain should be based on the character of …

Access Assured: Restoring Progressivity In The Tax And Spending Programs For Higher Education, Kerry A. Ryan

All Faculty Scholarship

Presently, the federal government subsidizes the higher education expenses of individual college students through two distribution channels: the tax system and the transfer system. Under each subsystem, there are a multitude of programs available to assist students in meeting their postsecondary educational expenses. The proliferation of so many forms of federal student aid raises issues of intra- and inter-program effectiveness. In their current form, the tax benefits for higher education do not get the right amount to the right people at the right time. The federal college spending programs, on the other hand, get the right amount to the right …

Reforming The Branch Profits Tax To Advance Neutrality, Fred B. Brown

All Faculty Scholarship

Congress enacted the branch profits tax in order to reduce the disparity between the taxation of U.S. subsidiaries and U.S. branches of foreign corporations. The branch profits tax attempts to promote neutrality by subjecting the U.S. branch earnings of a foreign corporation to a second level of U.S. tax upon the deemed remittance of the earnings outside of the U.S. branch. This is to approximate the second-level tax that occurs in the subsidiary setting when a U.S. subsidiary pays dividends to its foreign parent. Unlike the dividend tax in the subsidiary setting, however, the branch profits tax can apply even …

Wither Firpta, Fred B. Brown

All Faculty Scholarship

Under FIRPTA, foreign persons are subject to U.S. tax on dispositions of directly held interests in U.S. real property as well as on dispositions of stock in certain U.S. real property holding corporations. Congress enacted FIRPTA to combat several techniques used by foreign persons to avoid U.S. tax on dispositions of U.S. real estate. However, since FIRPTA's enactment, changes in the tax law would defeat these tax avoidance techniques. Consequently, this raises the issue of whether FIRPTA continues to make sense as a policy matter.

This article suggests that the repeal of portions of FIRPTA may be in order and …

Proposal To Reform The Like Kind And Involuntary Conversion Rules In Light Of Fundamental Tax Policies: A Simpler, More Rational, And More Unified Approach, Fred B. Brown

All Faculty Scholarship

Almost from the beginning of the federal income tax, the law has contained two nonrecognition provisions that have undergone relatively little change: the like kind rule and the involuntary conversion rule. Commentators have questioned the policy grounds for the like kind rule in general, and for some of its particular features, such as the exchange requirement. Congress and its staffers have also noted the complexity caused by certain aspects of the rule and have enacted or proposed remedial changes in this regard. The involuntary conversion rule also contributes to the complexity of the tax system given the fact-intensive analysis that …

Federal Income Taxation Of U.S. Branches Of Foreign Corporations: Separate Entity Or Separate Rules?, Fred B. Brown

All Faculty Scholarship

Foreign corporations conduct U.S. business activities either through U.S. subsidiaries or U.S. branches. A U.S. subsidiary of a foreign corporation generally is taxed as any other domestic corporation, that is, as a separate taxable entity apart from its foreign parent. In contrast, a U.S. branch of a foreign corporation is not treated as a separate taxable entity; instead, the Code and regulations employ a set of special rules that allocate and apportion to the U.S. branch a portion of the foreign corporation's income in order to determine the net income subject to U.S. tax.

The rules used for taxing U.S. …

Taxation Of The Disposition Of Partnership Issues: Time To Repeal I.R.C. Section 736, John A. Lynch Jr.

All Faculty Scholarship

As part of the Internal Revenue Code of 1954 Congress enacted section 736. This section specifies the tax treatment of the various types of payments that a partnership may make to a withdrawing partner. It introduced the concept of a liquidation of a partnership interest by the partnership itself, as opposed to the sale of that interest to an outsider or to the continuing partners. In some instances it provides tax consequences for continuing and withdrawing partners which are different from those attendant to a sale. It was designed to make the law concerning disposition of partnership interests simpler and …