Law Commons^™

Private Benefits In Public Offerings: Tax Receivable Agreements In Ipos, Gladriel Shobe

Vanderbilt Law Review

Historically, an initial public offering ("IPO") was a process whereby a company sold all of its underlying assets to the public. A new tax innovation, the "tax receivable agreement" ("TRA'), creates private tax benefits in public offerings by allowing pre-IPO owners to effectively keep valuable tax assets for themselves while selling the rest of the company to the public. Prior to 2005, TRAs were almost never used in IPOs. Today they have become commonplace, changing the landscape of the IPO market in ways that are likely to become even more pronounced in the future. This Article traces the history of …

Pro And Con (Law): Considering The Irrevocable Nongrantor Trust Technique, Alyssa A. Dirusso

Vanderbilt Law Review

Commentary on Jeffrey Schoenblum, Strange Bedfellows: The Federal Constitution, Out-of-State Nongrantor Accumulation Trusts, and the Complete Avoidance of State Income Taxation'

Democracy And Opportunity: A New Paradigm In Tax Equity, James R. Repetti

Vanderbilt Law Review

Academics and policymakers pay little attention to the interaction of a tax system with the objectives of a just government. For example, in the debate about whether the United States should retain an income tax or adopt a consumption tax, most discussions focus on the relative efficiency and equity of the taxes. Proponents of a consumption tax worry that an income tax is inefficient because it burdens investment income. Advocates of an income tax fear that a consumption tax is not equitable because low-income taxpayers consume a greater percentage of their income than wealthy taxpayers. These concerns date at least …

The Hidden Costs Of The Progressivity Debate, Nancy C. Staudt

Vanderbilt Law Review

Progressive taxation-taxing high income individuals at a proportionally higher level than low income individuals-has sparked more than a century of controversy. Those who support progressive taxation have heralded it as a policy that promotes the greatest good for the greatest number in society protects traditional democratic values, reflects the communitarian world-view of women who see themselves as responsible for the well-being of all individuals, and reveals the "aesthetic judgment" that income inequality is "distinctly evil or unlovely." At the same time, critics have condemned progressive income taxation as social policy that amounts to theft and involuntary servitude, reflects the democratic …

The Innocent Spouse Problem: Joint And Several Liability For Income Taxes Should Be Repealed, Richard C.E. Beck

Vanderbilt Law Review

Husbands and wives who elect to file joint federal income tax returns are jointly and severally liable for the entire tax due. Ninety-nine percent of married couples who file income tax returns make the election to file jointly, and each spouse thereby incurs personal liability for the other spouse's income taxes.' This Article argues that the rule is unfair and unjustified and should be repealed.

Part II of the Article describes the nature and scope of the problems caused by joint and several liability of spouses filing joint re-turns (hereinafter "joint return liability"). When separation or divorce is involved, the …

1988 Amendment To 26 U.S.C. Section 7430: Expanding Taxpayers' Rights To Recover Costs In Tax Controversies, Debra A. Chini

Vanderbilt Law Review

Bureaucratic mistakes at the Internal Revenue Service (IRS) forced Barbara and David Kaufman to seek a court-ordered injunction prohibiting the IRS from collecting a 14,380 dollar tax assessment for 1980. Even though the Kaufmans had notified the IRS office in Chicago of their new Maine address, the IRS mistakenly mailed the preliminary notice of deficiency to the Kaufmans' prior Illinois address. In addition, the Service mailed the statutory notice of deficiency to another couple also named Barbara and David Kaufman.' Because the Kaufmans never received notice of the proposed deficiency, they did not have an opportunity to contest the tax …

State And Local Taxation Of Financial Institutions:An Opportunity For Reform, C. James Judson, Susan G. Duffy

Vanderbilt Law Review

Forces at work in both public and private sectors may soon change the way state and local political subdivisions tax financial institutions. The market for financial services is changing dramatically. Governments have expanded substantially the scope of activities in which financial depositories may engage. The competitive environment for financial activities also is changing as general business corporations enter the financial services field, an area previously considered the exclusive domain of financial institutions. Financial institutions have increasing opportunities for interstate activity, which offers both risks and challenges. These changes have occurred during a period in which the extensive framework of state …

United States Taxation Of Its Citizens Abroad: Incentive Or Equity, Renee J. Sobel

Vanderbilt Law Review

The United States, unlike many sovereignties, has exercised worldwide income tax jurisdiction over its individual citizens since the inception of the income tax. Since 1926, however, United States citizens working abroad have received special treatment in the taxation of their foreign earned income. By the use of a tax credit, direct double taxation has been avoided. In addition, various exclusions and deductions have been permitted. Such tax preferences have been justified on the grounds that they promote tax equity and that they serve as incentives to encourage Americans to work overseas.

This Article considers whether the special treatment of United …

Internal Revenue Service Summonses For "Sensitive"Accountants' Papers, Robert G. Nath

Vanderbilt Law Review

Every modern public corporation has obligations of accountability and disclosure to the public and to its shareholders. These accepted duties of disclosure, however, become the source of conflicts when government agencies make unanticipated inquiries of accountants about otherwise private or background data concerning the corporations they audit. This is particularly true when a public corporation's duties of financial accountability, which stem chiefly from securities law requirements and fiduciary duties,evoke the Internal Revenue Service's interest in information that may reveal or be probative of the corporation's tax liability. Most corporate taxpayers and their accountants understand and accept--if only reluctantly--their obligations to …

Book Reviews, Lawrence M. Friedman, Allaire U. Karzon

Vanderbilt Law Review

The Politics of Justice: Lower Federal Judicial Selection and the Second Party System - Book Author: Kermit L. Hall; Book Reviewed by Lawrence M. Friedman

In The Politics of Justice, Kermit L. Hall, a history professor at Wayne State University, takes a look at the way Presidents from Jackson through Buchanan picked judges for the federal district courts and for the territories. There were 240 such appointments during the period studied...

There is something of a literature on the selection process,"although Hall's book does fill a rather glaring hole. The tale Hall tells rings true if we ignore a few …

Proposed Legislative Solutions To Tax Shelter Partnership Abuses - The End Of The Aggregate Concept?, Thomas E. Settles

Vanderbilt Law Review

This Note first will set forth the Treasury Department's perception of the present abuses of tax shelter partnerships and will analyze existing procedural rules, the Treasury Department's proposed amendments, and the House of Representatives' proposed amendments in light of these abuses. Next, the Note will examine the substantive law of Subchapter K and will attempt to point out the probable effects of the proposed amendments on the aggregate concept of partnerships, on substantive partnership tax law, and on the viability of the partnership form of business. Finally, this Note will propose a solution to the problem of tax shelter partnership …

Alternative Gains Tax Treatments Of Decedents' Appreciated Capital Assets, D. Allen Grumbine

Vanderbilt Law Review

The present treatment of appreciated assets under section 1014' of the Code permits a great deal of accrued appreciation to escape the income tax. While decedents pay a greater estate tax because asset appreciation swells their estates, they pay no gains tax at death on this accrued appreciation. Moreover, the recipients of the decedent's property generally take a stepped-up basis for the property equal to its fair market value at the time of death. A great deal of criticism has been leveled at this system, and numerous proposals have been made for remedying the situation: imposition of a capital gains …

Book Notes, Law Review Staff

Vanderbilt Law Review

The Child Savers: The Invention of Delinquency By Anthony M. Platt Chicago: University of Chicago Press, 1969. Pp. ix, 202.$8.50.

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Juvenile Delinquency and Urban Areas (rev. ed.) By Clifford R.Shaw & Henry D. McKay Chicago: University of Chicago Press,1969. Pp. 394.

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The Positive School of Criminology Edited by Stanley E. Grupp Pittsburgh: University of Pittsburgh Press, 1968. Pp. vi, 114. $5.95.

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State and Local Tax Problems Edited by Harry L. Johnson Knoxville: University of Tennessee Press, 1969. Pp. xiii, 190. $7.50.

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Tension in the Cities By James A. Bayton Philadelphia: Chilton Book Co., 1969. Pp. x, …

Recent Cases, Law Review Staff

Vanderbilt Law Review

Conflict of Laws--Divorce-- Minimum Contacts Doctrine Extended to Non-Resident in Alimony Award

Conflict of Laws--Torts--Law of Forum Applies to Accident Involving Only Out-of-State Motorists

Constitutional Law--Desegregation--States Are Required To Take Affirmative Action To Desegregate Higher Education Facilities

Constitutional Law--Selective Service Act--Fifth Amendment Requires Civil Judicial Review of Draft Board Classification and Induction Orders

Public Welfare--Substitute Father Regulation Inconsistent with Social Security Act and Invalid Criterion for Denying AFDC Payments to Needy Children

Taxation--Corporate Income Tax--Pre-Sale Declaration of Dividend by Subsidiary in Amount Equal to Retained Earnings Held Tax-Exempt Inter-Corporate Dividend on Receipt by Parent

The Tax Benefit Rule, Claim Of Right Restorations, And Annual Accounting: A Cure For The Inconsistencies, John G. Corlew

Vanderbilt Law Review

The Internal Revenue Code is premised on an annual accounting concept which requires the taxpayer to count up his transactions at the end of the year and remit to the Government taxes based on the occurrences of that particular year. In theory this requires disregarding the factors of prior or subsequent taxable years, despite the irrelation to events of the tax year in question. In most instances, annual accounting poses no special problem. When applied to certain items whose tax impact transcends more than a single taxable year,however, inconsistencies and inequities may result. Two instances in which inconsistent tax treatment …

Bosch And The Binding Effect Of State Court Adjudications Upon Subsequent Federal Tax Litigation, William E. Martin

Vanderbilt Law Review

One of the unique facets of American federalism involves the interaction of state court decrees which determine or characterize an individual's property rights with subsequent federal court litigation which imposes the federal tax burden upon those rights. While Congress determines what relationships are to be taxed, state law creates and state court adjudications measure these relationships.' In 1934 the Supreme Court formulated the standard that the state court decision was to be followed by a federal tax court in the absence of collusion, since the decree established the state "law" in regard to the relevant property. However, the definitional and …

Federal Tax Rulings: Procedure And Policy, Saul C. Belz

Vanderbilt Law Review

The rulings program of the Internal Revenue Service was designed to meet the need for predictability of the tax consequences of any given financial transaction. Though the rulings program is not particularly important to the average taxpayer, it has become increasingly crucial both to the financial community and to the Service itself. As the tax laws become more complex, and tax risks become increasingly important to the success of business ventures, the need for confirmation before entering into a transaction is intensified. Thus parties to a transaction will generally request a ruling...

"whenever the answer is uncertain or when the …

Is A Partnership Under The Uniform Partnership Act An Aggregate Or An Entity?, A. Ladru Jensen

Vanderbilt Law Review

The conflict in entity versus aggregate views of a partnership is materially lessened in those jurisdictions which have removed the procedural disability of partnerships to be sued in their own names. The advantages secured by having a procedural statute allowing partnerships to be sued in their own names argue strongly for the adoption of such act in all of the states having the Uniform Partnership Act, as is indicated by the foregoing analysis. The recognition of the Internal Revenue laws of partnerships as an aggregate for purposes of income taxation will most surely long continue, even though partnerships may be …

Recent And Prospective Developments In Taxation Of Partnerships, Arthur B. Willis, Stephen A. Bauman

Vanderbilt Law Review

This article will attempt to set forth the provisions of the Revenue Act of 1962 insofar as they affect the taxation of partners and partnerships, the recent developments in this area in brief detail and wide exposure, and the significant aspects of expected future legislation,including an analysis of certain parts of H.R. 9662.

The Western Hemisphere Trade Corporation, Edward C. Blank, Ii

Vanderbilt Law Review

The existing complexity involved in the taxation of corporate income derived from sources without the United States has motivated Congress to undertake an extensive review of our governmental policy pertaining to this area of taxation. The particular provisions of the Internal Revenue Code of 1954 relating to this subject are merely an ad hoc accumulation, noticeably void of any systematic design. The intended purpose of the present congressional inquiry is to determine whether or not incentive taxation is a proper method by which this nation's foreign policies can be implemented. If it be deemed advisable to offer tax benefits to …

Book Reviews, Winthrop R. Munyan, John W. Fager, Walter P. Armstrong Jr., Jerry L. Moore

Vanderbilt Law Review

Taxation of Foreign Income By Boris I. Bittker and Lawrence F. Ebb. Stanford: Stanford University, 1960. Pp. xii, 580.

reviewer: Winthrop R. Munyan

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The Planning and Administration of Estates Edited by Rene A. Wormser. New York: Practising Law Institute, 1961. Pp. 324.

reviewer: John W. Fager

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How to Evaluate and Settle Personal Injury Cases By Allen Bush Indianapolis: The Bobbs-Merrill Company, Inc., 1959. Pp. x,148.

reviewer: Walter P. Armstrong, Jr.

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The Tax Practice Deskbook By Harrop A. Freeman and Norman D. Freeman Boston and Toronto: Little, Brown and Co., 1960. Pp. vii, 581. $17.50.

reviewer: Jerry L. …

Characterization Of An Income Tax For The Purpose Of The Foreign Tax Credit, Stanley L. Ruby

Vanderbilt Law Review

Perhaps the best reconciliation of the many conflicting policies underlying the foreign tax credit would be to give preferential treatment by tax treaties to investment income from those areas where our foreign policy dictates that investment should be encouraged, whereas taxes imposed on income from other areas should be handled by the deduction approach. Thus the loss of revenue through investment in heavily industrialized areas (with stable governments and relatively little risk-taking) with high tax rates would end, but there would exist the flexibility, through treaties, to encourage investment in underdeveloped areas.

Motor Carrier Taxation, Hal H. Hale

Vanderbilt Law Review

Provisions of the Federal Aid Highway Act of 1956 vastly expanded the federal role in highway improvement on a long range basis, especially with respect to the so-called Interstate System. Authorizations of highway aid were further increased substantially by Congress in legislation enacted in 1958. The 1956 act for the first time also provided that the funds to pay for federal aid highway programs should come from specified levies upon highway users and a highway trust fund was established for this purpose. Owing principally to cost increases exceeding the original estimates, it has become apparent since the 1956 act was …

The Coverage Of Unemployment Compensation Laws, Alanson W. Willcox

Vanderbilt Law Review

The federal tax which induced the states to enact unemployment compensation laws set a pattern of coverage which the states were under pressure to meet, but which they were wholly free to exceed. With notable exceptions, state coverage is shaped to conform with federal law. In this matter, indeed, federal leadership is so far accepted that the charge of federal "dictation" has not, as it has in other aspects of unemployment compensation, prevented some expansion of the system by federal initiative.

Coverage of the Federal Unemployment Tax Act starts with the concept of "employment" as the determinant of tax liability, …

Federal Income Taxes And The Civil Fraud Penalty, Raymond Whiteaker

Vanderbilt Law Review

The drive against tax evaders is now in full swing after a complete reorganization of the Internal Revenue Service, and the new Commissioner has promised an efficient enforcement of all revenue laws. Although the effective administration of the federal income tax rests primarily upon the willingness of the taxpayer voluntarily to disclose his correct income, Congress has provided certain civil and criminal penalties to punish those who have not fulfilled their obligations to the United States Treasury. This article will deal only with the administration and operation of the civil fraud penalty.

The most severe civil penalty that may be …

Section 112(B)(6): Benefit Or Burden?, Raymond Whiteaker

Vanderbilt Law Review

The general provision in the Internal Revenue Code pertaining to the liquidation of corporations is section 115 (c). Under this section gain or loss on a liquidation is recognized to the extent that the assets received in liquidation exceed or fail to exceed the basis of the share-holder's stock. An exception to this general rule, however, is provided by section 112(b) (6) whereby a parent may liquidate a subsidiary without recognizing any gain or loss on the liquidation if the statutory requirements are met.

The nonrecognition provision first appeared in the Revenue Act of 1935 as section 110 (a).' This …

Book Reviews, Robert J. Lynn (Reviewer), William J. Bowe (Reviewer), Samuel J. Foosaner (Reviewer), Stanley D. Ross (Reviewer)

Vanderbilt Law Review

Handbook on the Law of Future Interests

By Lewis M. Simes

St.Paul, West Publishing Co., 1951. Pp. xv, 495. $8.00

reviewer: Robert J. Lynn

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Tax Savings in Real Estate Transactions

Prepared by Bureau of Analysis, Davenport, Iowa. Chicago: Published under auspices of National Institute of Real Estate Brokers of the National Association of Real Estate Boards, 1951. Pp. 98. $5.00

reviewer: William J. Bowe

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Income Tax Treatment of Life Insurance proceeds and other Tax Articles

By William J. Bowe

Nashville: Vanderbilt University Press,1951. Pp. 90. $2.10

reviewer: Samuel J. Foosaner

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Justice According to Law

By Roscoe Pound …

Recent Cases, Law Review Staff

Vanderbilt Law Review

RECENT CASES

CONTRACTS--CONSIDERATION--AGREEMENT TO SUPPORT ILLEGITIMATE CHILD

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CONTRIBUTION--JOINT TORTFEASORS--REMEDY GRANTED

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CONTRIBUTION--JOINT TORTFEASORS--REMEDY GRANTED WHEN TORT CONSISTS OF NEGLIGENCE

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CREDITORS' RIGHTS--RECEIVERSHIP OF OPERATING BUSINESS--CHATTEL, MORTGAGEE ENTITLED TO FORECLOSURE RATHER THAN SMALLER MONTHLY PAYMENTS ORDERED BY COURT

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EVIDENCE--DEAD MAN STATUTE--OBSERVATION OF PHYSICAL CONDITIONS NOT A "TRANSACTION" WITHIN MEANING OF STATUTE

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EVIDENCE--JUDICIAL NOTICE--TENETS OF COMMUNIST PARTY

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FEDERAL COURTS--HABEAS CORPUS IN EXTRADITION PROCEEDINGS--NECESSITY OF EXHAUSTING REMEDIES IN STATE COURTS

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IMPLIED WARRANTY--WARRANTY OF SEAWORTHINESS--WARRANTY WITHOUT A SALE

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NEGLIGENCE OF LANDOWNER--PERSON TAKING SHORTCUT THROUGH STORE--LICENSEE OR BUSINESS GUEST?

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RES JUDICATA--INDEMNITOR-INDEMNITEE RELATIONSHIP AS EXCEPTION TO REQUREMENT OF MUTUALITY--CREATION …

Current Constitutional Problems In Federal Taxation, Charles L.B. Lowndes

Vanderbilt Law Review

The most significant constitutional problem in federal taxation today is the absence of constitutional problems. The federal income, estate and gift taxes all encountered an extremely critical reception at the hands of the courts and suffered serious constitutional set-backs early in their careers. Today, however, they function in a constitutional climate as benevolent as it was formerly hostile. A microscopic analysis of the present federal tax system may reveal minor irregularities which might conceivably be magnified into major constitutional issues. From a practical point of view, however, the chance of invalidating a federal tax assessment on constitutional grounds is infinitesimal. …

Options And Valuation Of Property For Federal Tax Purposes, William J. Bowe

Vanderbilt Law Review

In Estate of John Q. Strange, there was an agreement between two brothers, engaged in business in a close corporation, which provided that upon the death of either, the survivor might acquire the stock of the other upon payment of $10,000 to his estate. Payment was so made following the decedent's death. The fair market value of the stock on the date of death was stipulated to be $238,126.54. The Board of Tax Appeals held that the option price of $10,000 was the proper amount to be included in the decedent's gross estate as the value of his stock.

In …