Law Commons^™

Reckless Means Reckless: Understanding The Eitc Ban, John Plecnik

Law Faculty Articles and Essays

This article argues that the legislative history of the EITC ban demonstrates that Congress intended to import to section 32(k) the well-established definition for reckless or intentional disregard from section 6662, which imposes the accuracy-related penalties.

The Future Of Corporate Tax Reform: A Debate, Deborah A. Geier, Omni Y. Marian, David S. Miller, Adam H. Rosenzweig

Law Faculty Articles and Essays

Professor Geier participated in a Lincoln-Douglas style debate, where the debaters were assigned different roles, so the opinions expressed were not necessarily their own. On the first point debated, Professor Geier was assigned to argue: The Affirmative: We Need to Tax Corporationsat the Entity Level. Others argued the negative: The United States Should Repeal the Corporate Income Tax. On the second point debated, Professor Geier argued the negative, that Dividend Exemption Is NOT the Best Method of Corporate/Shareholder Integration, and is in fact the worst method. On the third point, Professor Geier argued in the affirmative, that the corporate tax …

The Cost Of Progress: Enduring The Tax Deductibility Of International Corporate Social Responsibility Initiatives, Wayne C. Wood

Global Business Law Review

Until the end of the twentieth century, the predominant view in America was that a corporation’s sole duty was to supply wealth to its shareholders. The idea that a corporation owes a broader duty to all of its stakeholders has gained ground based largely on the emerging international recognition of human rights norms. Increasingly American MNCs have opted to voluntarily create and implement CSR policies for moral, economic, and political reasons. While charitable donations made to exempt organizations are expressly deductible under section 170 of the Internal Revenue Code, the same might not be true for a given CSR expenditure. …

Avoiding Misuse Of Donor Advised Funds, Michael J. Hussey

Cleveland State Law Review

This Article presents a proposal for further modifying donor advised funds to retain most of their hallmark flexibility and ease of use while drawing them into line with other charitable giving vehicles that put contributed funds to use for active charitable purposes. This Article argues that using individual retirement accounts as an underlying legal model for donor advised funds will address Congress's concerns regarding the appropriateness of the income tax deductions for contributions to donor advised funds while allowing donor advised funds to retain much of their hallmark flexibility and ease of operation.

Question Of Purpose: Early Retirement Payments To Tenured Professors Constitute Wages Subject To Fica Taxation, Stephen Scott Wick

Cleveland State Law Review

Currently, there is a circuit split on the issue of whether early retirement payments (ERPs) made to tenured faculty constitute wages subject to Federal Insurance Contribution Act (FICA) taxation. In North Dakota State University v. United States, the Eighth Circuit held that ERPs made to tenured faculty do not constitute FICA wages because such payments are made to purchase the constitutionally protected property interest that tenured faculty hold in their tenure rights. However, the Sixth and Third Circuits, in Appoloni v. United States and University of Pittsburgh v. United States respectively, held that such payments do constitute FICA wages because …

Use Of Judicial Doctrines In Federal Tax Cases Decided By Trial Courts, 1993-2006: A Quantitative Assessment, Daniel M. Schneider

Cleveland State Law Review

The hypothesis of this Article is that the accepted wisdom--that judicial doctrines are raised exclusively by the government or the courts for the government's benefit--is wrong. Instead, judicial doctrines are used in a much richer manner by courts and by taxpayers, as well as the government, than the “wisdom” would suggest. It is the first paper to question the accepted thought about judicial doctrines and to do so using social science methodology. Starting at the end and working forward, the evidence assembled for this Article from a group of trial decisions about federal tax controversies establishes that, under the language …

Another Take On The Mortgage Debt Relief Situation, Deborah A. Geier

Law Faculty Articles and Essays

Prof. Deborah A. Geier responds to Prof. Stephen Cohen's viewpoint on the mortgage debt relief debate.

Recharacterization Of Unreasonable Compensation: An Equitable Mandate, Barbara F. Sikon

Cleveland State Law Review

This note identifies the inequities inherent in the failure to recharacterize unreasonable compensation payments and proposes that the taxpayer be allowed to present evidence of an alternative characterization after the government determines a reasonable allowance. Part I of this note demonstrates the historical applications of section 162 supporting a purpose of challenging payments disguised as compensation with an accompanying tax advantage. It will explore the legislative history and statutory implications, as well as applications in case law. Part II explains the highly subjective character of the determination of reasonableness and explores the numerous dimensions of that judgment. Part III explains …

Incremental Versus Fundamental Tax Reform And The Top One Percent, Deborah A. Geier

Law Faculty Articles and Essays

This article describes the historical shift from consumption taxation at the federal level to income taxation with the enactment of the 16th amendment (the intent of which was chiefly to tax the capital income of the wealthy) and the incremental shifts since then back toward consumption taxation (which frees capital from tax) through expansion of both the payroll taxes as well as the consumption tax features of our current hybrid income/consumption tax that target the middle class.

It then addresses the issue of whether we ought to expand consumption tax treatment to the very wealthy by reviewing two recently published …

Money From Heaven: Should Qualified Air Rights Donations Be Characterized As Interests In Land Or Buildings - Why Does It Matter , Daniel Markey

Cleveland State Law Review

Currently, the Internal Revenue Service (hereinafter I.R.S.) and the federal courts do not offer specific positive authority as to whether large amounts of easement value from donated air rights can be allocated against the capital account of "land" as opposed to a "building" on a given tract of real estate. A lack of authority in this area creates uncertainty in the real estate market. This uncertainty is not only with the payment of federal income, estate, and gift taxes, but it also has a ripple effect with the assessment of local property taxes. Most importantly, if a deal is on …

Simplifying And Rationalizing The Federal Income Tax Law Applicable To Transfers In Divorce, Deborah A. Geier

Law Faculty Articles and Essays

This 2002 article explores the tax consequences of transfers in divorce and suggests how the tax consequences can be both simplified and rationalized. This article was written as an "Academic Adviser" to the Joint Committee on Taxation in connection with a study mandated by Congress on the overall state of the Federal tax system (June 2000 through April 2001) and was first published at JOINT COMMITTEE ON TAXATION, STUDY OF THE OVERALL STATE OF THE FEDERAL TAX SYSTEM AND RECOMMENDATIONS FOR SIMPLIFICATION JCS-3-01, VOLUME III (ACADEMIC PAPERS), April, 2001, at 19.

Integrating The Tax Burdens Of The Federal Income And Payroll Taxes On Labor Income, Deborah A. Geier

Law Faculty Articles and Essays

This 2002 article explores the increasing burden of federal income and payroll taxes on labor income and how those tax burdens might be integrated.

Are Frequent Flyer Benefits Really Benefits: An Analysis Of The Frequent Flyer Tax Debate And A New Theory Of Taxability For Frequent Flyer Benefts , Jennifer A. Cunningham

Cleveland State Law Review

This Note will begin with a brief history of frequent flyer programs and an explanation of how they operate, followed by a closer look at the traditional arguments for nontaxability of mileage earned on personal flights, taxability of mileage earned on business flights for an employer, and proposed theories for valuing the taxable mileage. Next, it will summarize failed attempts by both the courts and the legislature to resolve the issue. After establishing this background, the Note will explore the concept of gross income, particularly as reflected by section 61 of the Internal Revenue Code and interpreted by case law …

Accumulated Earnings Tax And Stock Redemptions - Further Thoughts On The Reasonable Business Needs Test, Michael S. Weiner, Bruce M. Graham Jr.

Cleveland State Law Review

Few penalty taxes have been imposed with the frequency of the tax on unreasonable accumulations of corporate earnings and profits. Any corporation "formed or availed of for the purpose of avoiding income tax with respect to its shareholders by permitting earnings and profits to accumulate instead of being divided or distributed" is subject to the tax. However, the tax is not properly imposed where the accumulations are for the reasonable business needs of the corporation. Accordingly, the question of what constitutes reasonable business needs is critical. This article considers one aspect of the reasonable business needs question: Under what circumstances …

Farm Tax Advantages After The Tax Reform Act Of 1976: Congress Finds The Needle But Misses The Haystack, Daniel A. Minkler

Cleveland State Law Review

This Note will first explain the source and operation of the benefits that may be derived from the utilization of the farm tax rules. Additionally, the ability of taxpayers to use farm losses to offset nonfarm income through sheltered investments will be examined. Next, the Note will review the attempt of Congress to reform the farm tax laws through the Tax Reform Act of 1969, including the attempted elimination of sheltered farm investments. Part III of the Note will explore the mechanics of those provisions of the Tax Reform Act of 19766 which were designed to curtail the use of …

Recognition Under Section 501(C)(3) Of The Internal Revenue Code As A Prerequisite To Arts Grants: A Special Problem For Literary Publishers And Art Galleries, Michael E. Skindrud

Cleveland State Law Review

This Article will examine the origin and impact of section 501(c)(3)recognition as a prerequisite to arts grants. Arts organizations which have the most difficulty obtaining recognition under section 501(c)(3) include small presses and literary magazines, organizations which assist visual artists with marketing, and certain arts service organizations. Their special problems in obtaining recognition will be examined. This Article suggests the appropriate test for recognition of exemption under section 501(c)(3) for organizations whose sole activity is a business which furthers their exempt purposes. This includes most small presses and literary magazines. The appropriate test is whether an exempt purpose, or profit, …

Assessing Internal Revenue Service Jeopardy Procedures: Recent Legislative And Judicial Reforms, Margaret M. Armen

Cleveland State Law Review

Recent events have led thoughtful citizens, jurists, and Congressmen to question the wisdom of allowing the Internal Revenue Service (Service) to assess and collect taxes without prior judicial hearing in those instances in which the revenue is thought to be "in jeopardy." Congress and the Supreme Court have made significant reforms which strengthen a taxpayer's rights against Service intransigence or arrogance with respect to jeopardy assessments. The reforms, the abuses which prompted them, and suggestions for future congressional action are the subject of this Note.

United States V. Foster Lumber Co.: Net Operating Losses And Capital Gains - You Can Have Two, But You Only Get One, Robert M. Wilson

Cleveland State Law Review

In 1974 a conflict development among circuit courts over the application of the net operating loss carryback provisions of the Internal Revenue Code to years in which a corporate taxpayer enjoyed the benefit of the "alternative" method for the computation of the capital gains tax. In November 1976, the United States Supreme Court resolved the conflict in favor of the Internal Revenue Service in United States v. Foster Lumber Co. This Case Comment will analyze Foster Lumber, as well as some of the earlier conflicting decisions, in an effort to determine if the Supreme Court has effectively resolved the problem

Real Estate Tax Shelters: How To Tell A Good Deal From A Bad Deal, Marvin Kelner

Cleveland State Law Review

That the purpose of these comments is to impart basic knowledge to the legal or financial advisor who is asked to render advice to his (or her) client (who is assumed to be in at least the 50 percent marginal income tax bracket) on whether to invest in a particular real estate tax shelter syndication. Hopefully, this article will enable such an advisor to give an informed opinion regarding the investment without holding himself out as an expert in real estate tax shelters. The following are my views with respect to important standards against which one can test the desirability …

The Contribution Limitations For I.R.C. 403(B) Tax Sheltered Annuities After Erisa, Kevin E. Irwin

Cleveland State Law Review

This Comment will consider the contribution limitations imposed upon section 403(b) annuities before ERISA and then proceed to examine the present contribution limitations in depth. A grasp of the mechanics of calculating an employee's contribution limitations is indispensable to an understanding of the concepts involved. Examples will therefore be used throughout this Comment to illustrate the determination of these limitations.

Real Property: For Connoisseurs Of The Preposterous - When Is It A Capital Asset, Michael S. Weiner

Cleveland State Law Review

The tax approach to profit realized from the sale or exchange of real property involves a complex determination of whether it is to be treated as ordinary income or a capital gain. This problem has plagued the practitioner for more than fifty years, and has produced a voluminous body of case law. Developments in recent years have resulted in some clarification, yet to a certain extent, decisions have merely complicated what was already complex.

Federal Taxation And Non-Profit Organizations, Marcus Schoenfeld

Cleveland State Law Review

The Revenue Act of 1969 is one of the greatest overall changes in the revenue laws since the introduction of the federal income tax . Perhaps the most extensive changes were made in the area of tax-exempt organizations. Only some of these changes were within of the topic of this presentation, and some of the other changes in the "charitable" area merit great discussion-for example charitable remainder trusts. Even the topics discussed herein, of necessity were discussed briefly due to lack of time and Regulations. The full the 1969 Act on non-profit organizations will not be apparent for quite some …

The Not-For-Profit Business Corporation, James K. Weeks

Cleveland State Law Review

The Non-Profit Corporation is usually regarded traditionally from a lay and legal viewpoint as one being engaged in charitable, educational, scientific or social work or a religious endeavor. On the other hand, the Not-for-Profit Corporation is more often engaged in enterprises usually associated with functions of a business corporation. However, as soon as one begins to view these corporations from a definitional standpoint, one is bogged down in an incredibly complicated procedure which does little to clarify the confusion.

Retirement Plans Limited To Salaried Employees: Tax Advantages And Qualification, Gerrit C. Kuechle

Cleveland State Law Review

Retirement plans are among the most effective tax saving devices available and can be extremely attractive, as will be shown, to the small corporation and the highly compensated employee, especially when it is considered that a properly designed plan can be integrated with Social Security so that larger benefits are provided on the salary in excess of that covered by Social Security than on the salary subject to Social Security.

Retirement Plans For Self-Employed Individuals, Doris R. Hauth

Cleveland State Law Review

The self-employed individual has not yet gained the status of the corporate employee in his ability to defer income, but the Keogh Act, asamended in 1967, does afford him substantial tax savings. The benefits should be thoroughly considered by all who qualify.

Excessive Salaries In A Closely Held Corporation, Donald J. Zinner

Cleveland State Law Review

Excessive salaries paid by a closely held corporation create a constant debate between the "owners" of the entity and the Internal Revenue Service, and with other corporation members. The basic law as to the tax aspects underlying the controversy, in the Internal Revenue Code of 1954, is substantially as follows: The compensation claimed as a deduction must be reasonable in amount, and must be paid purely for services. Distributions of profits under the guise of salaries are not deductible. This crucial issue leads to the question: What does the word reasonable salary mean in the framework of a closely held …

Book Review, James T. Flaherty

Cleveland State Law Review

Reviewing Weston Vernor Jr., Lillian M. Vernor and James F. Walom, Federal Income Taxation of Individuals, Jooint Committee on Continuing Legal Education, 1967

The Bootstrap Loophole: Can It Be Closed, Frank C. Fogl Jr.

Cleveland State Law Review

The puropse of this paper is to review the history and background of bootstrap transactions and to determine: (1) Whether there is a need to close the bootstrap loophole; (2) If so, why this loophole has not been closed in the past; (3) Whether the Internal Revenue Code as it now exists contains provisions, if used, that can close this loophole; (4) If new legislation would be required to reach this end. A few key cases will be reviewed and analyzed, with major emphasis placed on the recent Clay Brown' decision, to show the attitude toward bootstrap transactions of both …

Unreasonable Accumulation Of Income By Foundations, Joel H. Feld

Cleveland State Law Review

Unreasonable accumulation of income was and still is one of the the common abuses found in some foundations. Prior to 1950 the Internal Revenue Service challenged foundation exemption by stating that unreasonable accumulations of income were evidence that the foundation was not organized for, or carrying out, a charitable purpose. The courts were reluctant to follow this theory, and gave the law a liberal interpretation in favor of the foundations. It was not until 1950 that Congress enacted Section 3814 of the Internal Revenue Code of 1939. The law is the same today in the Internal Revenue Code of 1954, …

Federal Tax Returns As Evidence In Non-Tax Cases, Laurence Glazer

Cleveland State Law Review

Many cases deal with the use of Federal tax returns in non-tax cases. The inherent danger in subjecting tax returns to discovery at pre-trial and admission at trial, is the unnecessary disclosure of confidential information. Yet, when income tax returns are material and relevant to the claims of the parties litigant, a contention of privileged communication should not be used to defeat justice.