Tax Law Commons^™

Income Tax Accounting Consistency: Eliminate Accrual And Depreciation, And Revamp The Tax Treatment Of Borrowing, Joseph M. Dodge

Joseph M Dodge

Abstract for

INCOME TAX ACCOUNTING CONSISTENCY: ELIMINATE ACCRUAL AND DEPRECIATION, AND REVAMP THE TAX TREATMENT OF BORROWING

Joseph M. Dodge

Professor Emeritus, Florida State University College of Law

The thesis is that inconsistent tax accounting rules undermine the individual income tax, and the best available move for improving it – given the unassailability of the realization principle - is to eliminate its accrual (and quasi-accrual) features. Specifically, the agenda is to eliminate tax accrual accounting in the conventional sense, revamp the tax treatment of borrowing to (inter alia) abolish the Crane doctrine, and eliminate depreciation deductions for indivisible productive assets. …

A Market For Tax Compliance, Walter E. Afield Iii

Walter E Afield III

It is becoming increasingly clear that, due to political realities and budgetary constraints, the IRS is going to have to attempt to enforce the tax laws by doing more with less. Current enforcement efforts have yielded a tax gap (i.e., the difference between the amount of taxes that should be paid and the amount that are collected) of roughly $450 billion annually. Faced with this task, one of the steps that the IRS has recently taken is to try to improve the quality in services performed by paid tax preparers, a group that historically has been subject to little IRS …

The Overlap Of Tax And Financial Aspects Of Real Estate Ventures, Bradley T. Borden

Bradley T. Borden

This article examines the effect partnership tax law has on financial aspects of real estate ventures. It introduces the relevance of the aggregate and entity views of tax partnerships (i.e., LLCs, LPs, and other partnerships) and demonstrates how those views can greatly affect financial projections for each of the members of a real estate venture. It also demonstrates how financial calculations can vary significantly depending upon how closely analysts track a tax partnership’s allocation method. Finally, the article serves as a primer for tax practitioners who are unfamiliar with the financial tools that are so prevalent in real estate analysis, …

Sub S Valuation: To Tax Effect, Or Not To Tax Effect, Is Not Really The Question, Glen M. Vogel

Glen M Vogel

There were approximately 4 million Subchapter S corporations in 2008, with around 7 million shareholders. Because these companies are not publicly traded, their valuation in estate tax matters, divorces, shareholder disputes and other cases can present difficult issues for courts. In particular, the impact on the valuation of these companies of their “pass-through” tax status has been controversial since 1999, with different courts adopting different solutions. This article explains the nature of the issue, and presents a financial model for understanding the differential impact of taxes on the values of S and C corporations. The paper analyzes key court decisions …

Keep Your Friends Close But Your Auditors Closer: Corporations Risk Waiver When Independent Auditors Request Work Product, Daniel Reach

Daniel Reach

In the current transparency-driven regulatory environment, corporations’ efforts at compliance are rife with uncertainty. The work product doctrine is a core safeguard of a lawyer’s work, which may contain sensitive information that corporations would not want disclosed to opposing parties. Meanwhile, independent auditors serve in a perilous capacity as they provide necessary services to their corporate clients while risking potentially adverse exposure of the information these clients and their counsel disclose to them. The work product doctrine is a time-honored and rule-driven protection that guards the mental impressions and work efforts of lawyers from discovery by opposing parties. Public accounting …

The Liability-Offset Theory Of Peracchi, Bradley T. Borden, Douglas L. Longhofer

Bradley T. Borden

Peracchi v. Commissioner is a lightning rod for commentators and the bane of students of corporate income tax. In short, the decision makes no sense because it grants the maker of a note a section 1012 basis in the note, violating a fundamental principle of income taxation. Nonetheless, the decision helped preserve a fundamental aspect of corporate taxation—the tax-free formation of and contributions to controlled corporations. Because of its unorthodox application of the section1012 basis rules, the Peracchi decision is the subject of severe criticism. Unfortunately, commentators who criticize Peracchi generally fail to offer an alternative that recognizes general income …

The Allure And Illusion Of Partners' Interests In A Partnership, Bradley T. Borden

Bradley T. Borden

Favorable tax treatment and management flexibility make tax partnerships very popular. For starters, tax partnerships, unlike tax corporations, are not subject to entity-level taxes. Partnership taxable income flows through to the partners, and the partners report their shares of partnership taxable income on their individual tax returns. Partnership tax allocation rules determine the partners’ shares of partnership taxable income. Those rules rely upon the alluring concept of partners’ interests in a partnership. It seems intuitive that partners would know their interests in a partnership and be able to allocate partnership taxable income accordingly. This Article illustrates, however, that the concept …