Law Commons^™

The Great Etf Tax Swindle: The Taxation Of In-Kind Redemptions, Jeffrey M. Colon

Faculty Scholarship

Since the repeal of the General Utilities doctrine over 30 years ago, corporations must recognize gain when distributing appreciated property to their shareholders. Regulated investment companies (RICs), which generally must be organized as domestic corporations, are exempt from this rule when distributing property in kind to a redeeming shareholder.

In-kind redemptions, while rare for mutual funds, are a fundamental feature of exchange-traded funds (ETFs). Because fund managers decide which securities to distribute, they distribute assets with unrealized gains and thereby significantly reduce the future tax burdens of their current and future shareholders. Many ETFs have morphed into investment vehicles that …

Obama Tax Reforms Are Misguided, Constantine N. Katsoris

Faculty Scholarship

No abstract provided.

Tax Expenditures, Reform, And Distributive Justice , Linda Sugin

Faculty Scholarship

Tax reform is coming, and it will be an important part of any plan to avert national fiscal disaster. The President's Fiscal Commission recently presented a proposal for comprehensive tax reform that will form the basis for serious legislative discussion. At the center of that proposal is elimination of "tax expenditures, " which are provisions in the tax law that operate like direct government spending. They include the charitable deduction, the home mortgage interest deduction, the exclusion for employer provided health insurance, the child credit, the earned income credit, education credits and deductions, the tax preference for retirement savings accounts …

Philosophical Objection To The Optimal Tax Model, A , Linda Sugin

Faculty Scholarship

This article questions the normative power of the optimal tax model by examining assumptions made by the developer of that model, James Mirrlees' . It makes a case for moving beyond utilitarian conceptions of social welfare that are at the foundation of the optimal tax model, and that have become the dominant construct in tax policy analysis. In explaining why the Mirrlees assumptions are problematic, the Article argues for a nuanced, philosophical understanding of fairness that incorporates the role of taxation into a broader conception of a just society. A fair tax must satisfy the full range of demands that …

Encouraging Corporate Charity , Linda Sugin

Faculty Scholarship

The tax law governing corporate philanthropy is stuck in an archaic notion of corporate charity that does not necessarily benefit either charities or corporate stakeholders. Four developments in the last few years provoked this reexamination of the Internal Revenue Code and its awkward dichotomy between business expenses and charitable contributions. They offer new reasons for replacing the charitable contribution deduction for corporations with a business expense deduction: (1) a statutory reduction in the rate of tax on dividends received by individual shareholders, (2) empirical evidence showing very low effective tax rates paid by corporations, (3) death of the preeminent model …

Sustaining Progressivity In The Budget Process: A Commentary On Gale & (And) Orszag's An Economic Assessment Of Tax Policy In The Bush Administration, 2001-2004 The State Of Federal Income Taxation Symposium: Rates, Progressivity, And Budget Processes, Linda Sugin

Faculty Scholarship

This Commentary proposes the adoption of pay-go procedural rules for tax lawmaking that favor tax cuts that decrease income inequality, in response to biases in distributional tables and distortions in the political process. It suggests that the failure to use present value analysis in the budget process has had unfortunate, unintended consequences, in particular, a congressional preference for a prepaid-type consumption tax. This Commentary argues that efforts to index the Alternative Minimum Tax (the "AMT") should not deflect attention from the AMT's most fundamental distributional problem-its failure to treat dividends and capital gains as preference items. It suggests that there …

Tax Expenditure Analysis And Constitutional Decisions , Linda Sugin

Faculty Scholarship

This article looks at the significance of the similarities and differences between tax benefits and direct spending for purposes of the equal protection and establishment clauses, with a particular focus on the charitable contribution deduction. Because economic equivalence is not critical under these constitutional provisions, tax expenditure analysis is not relevant to the legal analysis. While this article deals only briefly with numerous provisions of the Code and analyzes only two constitutional provisions, it provides a model for considering the constitutionality of any tax provision.

Theories Of The Corporation And The Tax Treatment Of Corporate Philanthropy Symposium: Corporate Philanthropy Law, Culture, Education, And Politics, Linda Sugin

Faculty Scholarship

This essay is organized as follows: Part I describes the entity model of the corporation as developed in corporate and ethical theory, showing how that model is embodied in the Code and how variations in that model produce different conclusions about the legitimacy of the charitable contribution deduction for corporations. It discusses some issues that arise when corporate philanthropy is considered in the context of the entity theory and how the tax law might respond to those issues. Part II explains how the nexus-of-contracts conception of the corporation, applied as an analytical tool, challenges the tax law's treatment of corporate …

Nonrecourse Debt Revisited, Restructured And Redefined , Linda Sugin

Faculty Scholarship

This article suggests that the foundation for the tax treatment of nonrecourse debt under current law-the true debt approach-is unworkable. It does not reflect economic reality or correctly measure income. It leads to bizarre and unpredictable consequences, and invites abuse, such as inflated seller financing and deduction shifting from low bracket to high bracket taxpayers. Much has been written about the role of nonrecourse debt in making abusive tax shelters profitable, and while abusive tax shelters no longer abound as they once did, nonrecourse debt continues to pose serious problems, even in the post-Tax Reform Act of 19862 era. If …

Double Jeopardy Of Corporate Profits, The , Constantine N. Katsoris

Faculty Scholarship

The more one reads about our economy, the more one is baffled and alarmed. Permanent solutions to economic problems are elusive. Treating one financial malaise often aggravates another sector of the economy, necessitating a delicate balancing of conflicting interests. Furthermore, the problems are complicated by the constant influence of foreign forces. Nevertheless, most economists agree that any solution will require enormous funding. Unfortunately, the public has little, if any, confidence in our tax system. Indeed, some tax laws and proposals have been referred to as "obscene" and a "disgrace to the human race." Few quarrel with the aptness of such …