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Judicial Review Of Treasury Regulations For Taxpaying And Nontaxpaying Citizens, Paul E. Sullivan, Jr.
Judicial Review Of Treasury Regulations For Taxpaying And Nontaxpaying Citizens, Paul E. Sullivan, Jr.
Washington Law Review
This paper explores the possibility of subjecting such an administrative ruling to judicial review initiated either by a taxpayer not benefited by the regulation or by a nontaxpayer. For either party to prevail he must prove that he has standing, that judicial review is available, and that there is a remedy which he can obtain by judicial review
Income Tax—Section 482 Of The Internal Revenue Act: Commissioner's Authority To Allocate Income Is Limited By Taxpayer Legal Disability—Commissioner Of Internal Revenue V. First Security Bank Of Utah, N.A., 405 U.S. 394 (1972), J. P. H.
Washington Law Review
First Security Bank, a wholly owned subsidiary of Holding Company, referred its borrowers to Security Life, a sister subsidiary, for the purpose of obtaining credit insurance. Security Life paid no commissions to First Security, but it did pay substantial dividends to Holding Company. By funneling all of the premium income through Security Life, which qualifed for preferential treatment as a life insurance company, Holding Company enjoyed a substantial tax advantage. The Commissioner of Internal Revenue, acting pursuant to section 482 of the Internal Revenue Code,4 sent notice of deficiencies to First Security based on an allocation to that subsidiary of …
The Limitless Limits Of The Foreign Tax Credit, Robert D. Kaplan
The Limitless Limits Of The Foreign Tax Credit, Robert D. Kaplan
Washington Law Review
The purpose of this comment is to describe some of the problems that exist in the present system of foreign tax credits, and to set forth some suggested improvements that can be made. The discussion proceeds in four steps: (1) a description of the growth of the present statutory framework, including a discussion of the political and economic factors which purported to influence its development; (2) an examination of the operation of the credit system and its limitations; (3) an examination of the limitations in greater detail with illustrations of how they are rendered largely impotent by their own internal …
Taxation—Income: Tax Computation Where Taxpayer Refunds Revenues Previously Reported Under Claim Of Right Doctrine.—United States V. Skelly Oil Company, 394 U.S. 678 (1969), Anon
Washington Law Review
In the years 1952 through 1957 the Skelly Oil Company received $505,536.54 from two customers due to a raise in the minimum price for natural gas by the Oklahoma Corporation Commission. In 1958 the Company was required to refund this money due to a vacation of the increased rates by an order of the United States Supreme Court. The Company had included the amounts received in gross income for income tax purposes during the years of receipt in conformance with the claim of right doctrine, whereby amounts received by a taxpayer who claims an unrestricted right to them must be …
Section 367: An Enigma, Julie W. Weston
Section 367: An Enigma, Julie W. Weston
Washington Law Review
Section 367 of the Internal Revenue Code of 1954 was enacted in its original form in 1932 in order to close what Congress considered to be a serious tax loophole available to domestic corporations and individuals carrying on business through the use of foreign corporations or contemplating the use of foreign corporations to realize large gains without paying taxes. The loophole resulted from the operation of the nonrecognition provisions of the Code dealing with the organization and reorganization of corporations. By using these provisions, individuals and corporations—both foreign and domestic—could transfer greatly appreciated property and unrealized profits on a tax-free …
The Capital Nature Of Educational Expenses, Anon
The Capital Nature Of Educational Expenses, Anon
Washington Law Review
Taxpayer, a practicing psychiatrist and part-time teacher of psychiatry, undertook a six year training program in psychoanalysis at the Boston Psychoanalytic Institute. In 1961, he deducted $3,650 paid in fees to the Institute as a business expense under section 162 of the Internal Revenue Code. Although taxpayer contended that the expenses were incurred primarily to maintain or improve skills required in his profession, the Commissioner disallowed the deduction. A sharply divided Tax Court upheld the disallowance, relying on two prior cases holding that when a psychiatrist undertakes training in psychoanalysis, he manifests an intent to acquire a specialty, not to …
Liquidations And Reincorporations—Before And After Davant, Roland L. Hjorth
Liquidations And Reincorporations—Before And After Davant, Roland L. Hjorth
Washington Law Review
Liquidations and reincorporations have been utilized in attempts to bail out corporate earnings and profits at capital gains rates. The success of these attempts has been limited by judicial extension of the corporate reorganization sections of the Internal Revenue Code. Professor Hjorth suggests that specific Congressional amendment of section 331 to encompass the liquidation reincorporation problem is preferable to extension of the reorganization provisions which occurred in the recent case of Davant v. Commissioner.
The Capital Nature Of Educational Expenses, Anon
The Capital Nature Of Educational Expenses, Anon
Washington Law Review
Taxpayer, a practicing psychiatrist and part-time teacher of psychiatry, undertook a six year training program in psychoanalysis at the Boston Psychoanalytic Institute. In 1961, he deducted $3,650 paid in fees to the Institute as a business expense under section 162 of the Internal Revenue Code. Although taxpayer contended that the expenses were incurred primarily to maintain or improve skills required in his profession, the Commissioner disallowed the deduction. A sharply divided Tax Court upheld the disallowance, relying on two prior cases holding that when a psychiatrist undertakes training in psychoanalysis, he manifests an intent to acquire a specialty, not to …
Liquidations And Reincorporations—Before And After Davant, Roland L. Hjorth
Liquidations And Reincorporations—Before And After Davant, Roland L. Hjorth
Washington Law Review
Liquidations and reincorporations have been utilized in attempts to bail out corporate earnings and profits at capital gains rates. The success of these attempts has been limited by judicial extension of the corporate reorganization sections of the Internal Revenue Code. Professor Hjorth suggests that specific Congressional amendment of section 331 to encompass the liquidation reincorporation problem is preferable to extension of the reorganization provisions which occurred in the recent case of Davant v. Commissioner.
Exemptions For Dependents: The Burden Of Proof Dilemma For Divorced Or Separated Parents, Anon
Exemptions For Dependents: The Burden Of Proof Dilemma For Divorced Or Separated Parents, Anon
Washington Law Review
Plaintiff, divorced and living apart from his former wife who had custody of their two sons, claimed dependency exemptions for both sons in his federal income tax returns for the two years in question. The Commissioner of Internal Revenue disallowed the exemption for one son in each of the two years. In affirming the Commissioner's determination, the Tax Court held that plaintiff failed to sustain the burden of proving that his contribution was more than half the total support of the children. Though able to establish the amount of his contribution, plaintiff could not prove the amount of support from …
An Introduction To Capital Gain And Losses, Roland L. Hjorth
An Introduction To Capital Gain And Losses, Roland L. Hjorth
Washington Law Review
In this article, originally prepared for his class in federal income tax, Professor Hjorth explores the theoretical bases and working principles underlying the taxation of capital gains and losses. Beginning with a review of basic federal income tax concepts and the provisions governing computation and recognition of all gains and losses, he proceeds through a comprehensive discussion of the basic Code provisions governing capital gains and losses. Additional discussion focuses on the specialized treatment afforded quasi-capital assets, copyrights and patents, inventory, discount bonds, short sales, small business stock, and foreign corporations.
Taxation Of Corporate Stock Received By Sole Shareholders Upon Cancellation Of Salary Obligations, Anon
Taxation Of Corporate Stock Received By Sole Shareholders Upon Cancellation Of Salary Obligations, Anon
Washington Law Review
Randall and Fender, sole and equal shareholders of Fender Sales, Inc., twice cancelled equal salary debts owned to them by their corporation. As part of these transactions, the corporation issued $100 par value common stock for each $100 of salary debt owed. Neither the corporation, which had previously deducted the salary liabilities as expenses for federal income tax purposes, nor the individuals, who were cash basis taxpayers, reported any income as a result of these transactions. The Commissioner of Internal Revenue determined that the receipt of stock constituted taxable salary income to the individuals or, alternatively, that the cancellation resulted …
Federal Income Tax Liability—Exception To Marital Bankruptcy, Anon
Federal Income Tax Liability—Exception To Marital Bankruptcy, Anon
Washington Law Review
Mrs. Draper had incurred unpaid federal income tax obligations prior to her marriage to Delmar Draper, and the Internal Revenue Service levied on one-half of Mrs. Draper's wages during marriage. The Drapers brought suit as a marital community to quiet title to the salary levied on to satisfy the wife's premarital obligation, contending that the wife's wages were community property and, therefore, not subject to satisfaction for the premarital debt. Defendant's motion to dismiss was sustained. Held: One-half of a spouse's wages, even though community property, can be levied on to satisfy a premarital federal income tax liability. Draper v. …
Loss Carryovers Under The 1954 Code: Rejection Of The Libson Shops Doctrine, Anon
Loss Carryovers Under The 1954 Code: Rejection Of The Libson Shops Doctrine, Anon
Washington Law Review
Taxpayer corporation, which had sustained losses in the hardware business, entered into an agreement with two partners engaged in real estate development whereby a department of real estate development was established within the corporation. Funds needed for the department's operations were furnished by the partners through the purchase of non-voting preferred stock valued at approximately two-fifths of the total value of the corporate stock. By the terms of the agreement, ninety percent of the profits of the department were to be distributed to the preferred stockholders. Voting control of the common stock was placed in a voting trust. Thereafter, the …
Legal Fees For Unsuccessful Defense To Criminal Prosecution—An "Ordinary And Necessary" Business Expense?, Anon
Washington Law Review
Taxpayer, a securities dealer, was tried and convicted of mail fraud and of fraud under the 1933 Securities Act, and conspiracy to violate these statutes. Thereafter he claimed a tax deduction for legal costs incurred in his defense under the "ordinary and necessary" business expense provision in section 162 of the Internal Revenue Code. The deduction was disallowed by the Commissioner, and this ruling was sustained by the Tax Court. On appeal, the Second Circuit Court of Appeals reversed. Held: Public policy does not preclude the deduction of legal expenses incurred in an unsuccessful criminal defense arising out of, proximately …
Turnbow V. Commissioner—Rejection Of The "Boot" Exception To A Type B Reorganization?, F. Robert Debruyn
Turnbow V. Commissioner—Rejection Of The "Boot" Exception To A Type B Reorganization?, F. Robert Debruyn
Washington Law Review
The United States Supreme Court in Turnbow v. Commissioner may have interpreted the Internal Revenue Code to preclude the receipt of "boot" in a non-taxable, stock for stock reorganization. Although the Court was interpreting the application of Section 112 of the 1939 Code, the decision may be decisive in the interpretation of the parallel sections in the 1954 Code.
Revenue Procedure 60-18—New Techniques For The Early Consideration And Disposition Of Tax Court Cases, Melvin L. Sears
Revenue Procedure 60-18—New Techniques For The Early Consideration And Disposition Of Tax Court Cases, Melvin L. Sears
Washington Law Review
With the promulgation of Revenue Procedure 60-18 (published in IRB No. 1960-37, p. 61), the Internal Revenue Service has again instituted a procedure for the benefit of the taxpayers, the tax Bar, the Tax Court and the Service. The effective operation of this new procedure undoubtedly will prove to be of substantial benefit to all parties concerned by securing a fair and expeditious disposition, either by settlement or trial, of tax controversies before the Tax Court.
Tax—Lease Agreements—Deductibility Of "Rental" Payments As Business Expense, Robert W. Mckisson Jr.
Tax—Lease Agreements—Deductibility Of "Rental" Payments As Business Expense, Robert W. Mckisson Jr.
Washington Law Review
During 1959 two cases involving the right to deduct as an "ordinary and necessary" business expense rental payments made pursuant to equipment lease contracts came before the Courts of Appeals of the Eighth and Ninth Circuits. Both taxpayers claimed the deductions were permissible by authority of section 162 (a) (3) of the 1954 Internal Revenue Code. In both cases the Commissioner of Internal Revenue determined that the "lease" agreements were actually conditional sales contracts, the taxpayer thereby having title to the property, or that with each "rental" payment the taxpayer acquired an equity in the property. The Commissioner disallowed the …
Federal Tax Liens, Rex M. Walker
Federal Tax Liens, Rex M. Walker
Washington Law Review
The purpose of this comment is to set out the basic statutory law on which the federal tax lien is founded, to examine the scope of the federal tax lien and its relative priority, and to indicate some of the precautions that can be taken to protect a credit transaction from it.
Community Property—Ownership During Probate Of The Estate Of One Spouse For Income Tax Purposes, John A. Gose
Community Property—Ownership During Probate Of The Estate Of One Spouse For Income Tax Purposes, John A. Gose
Washington Law Review
In the case of U.S. v. Merrill, 211 F.2d 297, (9th Cir. 1954), the court held that when a wife dies in the state of Washington leaving solely community property and the surviving spouse serves as executor of her estate, only one-half of the executor's fee paid to the husband from community funds is taxable to him as income. The other one-half of the fee is chargeable to his share of community property. Further, the court in dictum said that when one spouse dies leaving an estate consisting only of community property, the executor or administrator is not the owner …
Taxation—Prizes For Artistic Or Scholastic Accomplishments—Gifts Or Income?, Newman L. Dotson
Taxation—Prizes For Artistic Or Scholastic Accomplishments—Gifts Or Income?, Newman L. Dotson
Washington Law Review
P won $25,000 for the best symphony entered in a contest sponsored by a philanthropist. P composed his symphony during a three year period, 1936 to 1939, entered the contest and won the prize in 1947. The sponsor of the award derived no profit from the contest nor from P's participation in it. The Commissioner of Internal Revenue ruled that the entire award was taxable as income and under I.R.C. § 107(b), to be computed as though the award had been ratably received over the three year period ending with 1947. P filed a claim for refund on the ground …
Tax Treatment Of Stockholders' Advances (How Thick Must Be A Thin Corporation), F. A. Lesourd
Tax Treatment Of Stockholders' Advances (How Thick Must Be A Thin Corporation), F. A. Lesourd
Washington Law Review
With higher corporate tax rates and more emphasis by the Treasury on taxing distributions to stockholders as dividends, the advantage in setting up stockholders' advances to a corporation as loans rather than as equity capital has become more marked. Many stockholders commencing risky, incorporated businesses would like to get their capital out of the corporation as soon as possible so as to minimize the risk of loss in the event business conditions should turn bad. A stockholder cannot receive a return of part of his equity capital without serious question as to his liability for tax on the distribution as …
The Taxation Of Corporate Surplus Accumulations, By James K. Hall (1952), Kenneth A. Cox
The Taxation Of Corporate Surplus Accumulations, By James K. Hall (1952), Kenneth A. Cox
Washington Law Review
It is this provision of the tax laws which engages the attention of Dr. James K. Hall, Professor of Economics at the University of Washington, in this study prepared for the Joint Committee on the Economic Report. The result is a comprehensive and informative survey covering the basic purposes underlying Section 102, its history, its economic effects upon corporations within its orbit and upon the economy generally, the administration of the Section by the Bureau of Internal Revenue, its treatment by the courts, and the criticisms which have been leveled against it; together with proposals for its modification. Although designed …
Income Tax—Funds Received By Extortion As Income, Eleanor H. Edwards
Income Tax—Funds Received By Extortion As Income, Eleanor H. Edwards
Washington Law Review
T was an associate of X during prohibition when they were bootlegging liquor. After the partnership split up, T demanded money from X. When T threatened the lives of X and his family, X paid T $250,000. Held: The extorted funds are taxable to T as income since they were obtained under a "semblance of a bona fide claim of right" and in effect, without oblgation to repay since X was not likely ever to press demand for a return of the money. Ruthin v. United States, 343 U.S. 130 (1952).
Income Tax—Deductibility Of Legal Expenses, William S. Stinnette
Income Tax—Deductibility Of Legal Expenses, William S. Stinnette
Washington Law Review
P made a gift of 1,000 shares of stock to members of his family and paid the federal gift tax thereon. Thereafter P was notified by the Commissioner of Internal Revenue of a gift tax deficiency of $145,276.50. Through his attorney, P secured a settlement of the deficiency for $15,612.75. He did not deduct the legal expenses of the gift tax controversy from his gross income but later claimed an income tax refund on the ground that the legal fee should have been deducted under Int. Rev. Code § 23 (a) (2). The District Court held for P. The Court …
Community Interest In Commingled Income, Derived From Personal Service And Separate Capital—Another View, Benjamin H. Kizer
Community Interest In Commingled Income, Derived From Personal Service And Separate Capital—Another View, Benjamin H. Kizer
Washington Law Review
The lawyers of this state are deeply indebted to Mr. Francis A. LeSourd of the Seattle Bar for his thoughtful and scholarly analysis of "Community Property Status of Income from Business Involving Personal Service and Separate Capital." This article gives special pleasure in that Mr. LeSourd has taken pains to go to the historic roots of the problem—in the Spanish law and in the early decisions of other states. However, I am not at peace with one of Mr. LeSourd's conclusions. I venture, therefore,. to present an alternative to the view Mr. LeSourd has taken.
Averaging Fluctuating Income Of The Individual For Income Tax Purposes, Clyde R. Maxwell, Jr.
Averaging Fluctuating Income Of The Individual For Income Tax Purposes, Clyde R. Maxwell, Jr.
Washington Law Review
It is a familiar feature of our system of taxation that tax rates be graduated in proportion with the ability of the taxpayer to pay. As income rises, the percentage of tax is increased by the so-called surtax. For the taxpayer with approximately the same income, year after year, an annual imposition of tax according to these rates is equable; but unlucky is the individual who has high income one year and low income the next, for he must pay a substantial amount of tax over and above that which he would have had to pay had his income been …
Federal Income Tax Amendments Of 1944, Charles G. Flanagan, Jr.
Federal Income Tax Amendments Of 1944, Charles G. Flanagan, Jr.
Washington Law Review
Present 1944 changes of the federal income tax statutes consist of amendments made by the Revenue Act of 1943, and the Individual Income Tax Act of 1944 passed in February and May of this year respectively. Additional changes are unlikely. It is anticipated therefore, that there can now be presented an analysis of statutory changes which must be considered in the preparation of returns for the year 1944.
Federal Income Tax 1943—Special Benefits To Members Of The Armed Forces, Thomas Todd
Federal Income Tax 1943—Special Benefits To Members Of The Armed Forces, Thomas Todd
Washington Law Review
On June 9, 1943, with the enactment of "The Current Tax Payment Act of 1943," the serviceman became a taxpayer in a class by himself. Previously there were special benefits in favor of the serviceman, but now, for the year 1943, even the method of computing tax is entirely different for servicemen than it is for civilians. The reason why this subject should be of special interest to attorneys is that the present law affords a great opportunity for substantial tax savings and refunds in favor of servicemen for 1943. Thus, substantial refunds will be available for most servicemen who …
Federal Taxation Of Community Incomes—The Recent History Of Pending Questions, George Donworth
Federal Taxation Of Community Incomes—The Recent History Of Pending Questions, George Donworth
Washington Law Review
By the constitution of the United States, the Congress has power to lay and collect taxes, to pay the debts and provide for the common defense and general welfare of the United States. The constitution, however, also contains the further provision that no capitation or other direct tax shall be laid unless apportioned among the states in proportion to the population as ascertained by a federal census. In the year 1895 in Pollock v. Farmers Loan & Trust Co., 157 U. S. 429, 158 U. S. 601, 39 L. Ed. 759, 39 L. Ed. 1108, the Supreme Court of …