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The Tax Benefit Rule -- A Judicially Broadened Tool For Transactional Tax Equity, Jerry N. Smith

Vanderbilt Law Review

In light of the recent Supreme Court holding in United States v. Bliss Dairy, Inc.10 that the tax benefit rule requires income recognition by a corporation when it distributes previously expensed assets in complete liquidation, this Note assesses the dubious continued vitality of the tax benefit rule's single taxpayer construct-that is, the requirement that the same individual or entity serve as both the deducting and the recovering taxpayer. As the following analysis indicates, expansion of the tax benefit rule into a multiple taxpayer construct potentially requires some form of "recapture" in numerous factual settings previously considered non-taxable under existing nonrecognition …