Law Commons^™

The Social Security Benefits Formula And The Windfall Elimination Provision: An Equitable Approach To Addressing ‘Windfall’ Benefits, Francine J. Lipman, Alan Smith

Francine J. Lipman

Please find attached our article and draft bill. Thank you so very much for your interest in our work.

The "Illegal Tax", Francine J. Lipman

Francine J. Lipman

Almost fifty years ago in 1965, on the steps of the State Capital in Montgomery, Alabama, Dr. Martin Luther King, Jr., asked a crowd of twenty-five thousand "How long will prejudice blind the visions of men, darken their understanding, and drive bright-eyed wisdom from her sacred throne?" The crowd, celebrating the completion of the five-day, twenty-five mile march from Selma to Montgomery and their First Amendment rights encouraged Dr. King to "speak, speak." And he did answering his own question with poetry, faith, and optimism, "How long? Not long, because the arc of the moral universe is long, but it …

Saving Private Ryan's Tax Refund, Francine J. Lipman

Francine J. Lipman

Sergeant Horvath: This time the mission IS a man. Saving Private Ryan (1998)

Almost two million men and women serve the United States as enlisted personnel in the Army, Navy, Marines and Air Force. This essay will examine certain tax provisions unique to members of the armed forces and suggest a sweeping procedural change to save Private Ryan's tax refund. The proposed change is structured to better serve the unique demographics of the targeted taxpayers. A threshold issue when designing a tax benefit should be "Who is the targeted taxpayer?" Thus, the essay begins with a review of the demographics …

Shrinking Boomer Social Security Retirement Benefits, Francine J. Lipman

Francine J. Lipman

In 2008, the oldest of 78 million baby boomers will celebrate their 62nd birthdays. Before they blow out their birthday candles, they will have considered and likely decided whether to elect to take early Social Security retirement benefits (SSRBs). Recent and evolving changes in the normal retirement age under Social Security, Medicare premiums and increased exposure to income tax costs have reduced the net cash flow many senior boomers will enjoy from SSRBs. Because of the overall lack of transparency in the Social Security benefits formula and the complex interplay of continued work, Medicare, taxes, and the various timing-options, many …

Bearing Witness To Economic Injustices Of Undocumented Immigrant Families: A New Class Of 'Undeserving' Working Poor, Francine J. Lipman

Francine J. Lipman

Undocumented immigrants have little or no recourse for economic injustices they suffer through the U.S. tax system. Despite America's historically strong opposition to taxation without representation, undocumented immigrants have not enjoyed the right to vote on any local, state or federal tax for almost eighty years, except in rare and unusual cases. Furthermore, because of their precarious immigration and economic status undocumented immigrants are vulnerable to deportation and exploitation and are chilled from protesting any injustice. As a result they suffer economic injustices daily, which translate into lower prices for countless goods and services that are an everyday part of …

Celebrating Life (Chai) And Taxes: Lessons Learned, Francine J. Lipman

Francine J. Lipman

No abstract provided.

Unintended Consequences? Undocumented, Working Poor Families And The Refundable Child Tax Credit, Francine J. Lipman

Francine J. Lipman

Immigrants toil in sweatshops for torturously long days at sub-minimum wages, which may or may not be paid, with little meaningful recourse. Immigrant workers with and without authorization to work in the United States are disproportionately represented among the lowest earners. The average wage among all low-wage immigrant workers was $14,400 in 2001. Moreover, almost half of immigrant workers earned less than twice the minimum wage. These hard working individuals are living in poverty.

The Earned Income Tax Credit (EITC) lifts almost 20 million low-income working individuals out of poverty every year. Unfortunately, the EITC does not apply if a …

Anatomy Of A Disaster Under The Internal Revenue Code, Francine J. Lipman

Francine J. Lipman

In October 2003, California experienced record-breaking wildfires. The devastation from this catastrophic disaster was pervasive and staggering. The raging fires instantly turned several thousand homes and businesses together with the everyday and precious stuff of life into ashes. Thousands of families lost everything except the clothes on their backs. While the nation and the survivors were amazed that few lives were lost, the rebuilding process was and continues to be overwhelming. In addition to the emotional, physical, and financial demands of rebuilding, the tax consequences can be costly, complicated and unforeseen.

This article provides a systematic primer of the tax …

More Alternatives In The Complex World Of The Alternative Minimum Tax: The Election To Itemize Deductions, Francine J. Lipman, Nathan Oestreich, James E. Williamson

Francine J. Lipman

As a general rule, when the standard deduction is greater than a taxpayer's itemized deductions, claiming the larger standard deduction for regular income tax purposes will generate a lower tax liability. However, if the taxpayer is subject to the alternative minimum tax (AMT) the decision to take the standard deduction in lieu of itemizing her deductions could cost unnecessary tax dollars. An additional set of calculations is necessary to determine the most tax favorable alternative under the AMT. The additional calculations answer the question of whether the taxpayer's tax liability would be reduced by electing to itemize her deduction even …

Enabling Work For People With Disabilities: A Post-Integrationist Revision Of Underutilized Tax Incentives, Francine J. Lipman

Francine J. Lipman

Federal employment strategies for people with disabilities do not seem to be working. Scholars argue that the Americans with Disabilities Act and similar legislation that exemplify the disability theory of integrationism with the goal of integrating people with disabilities into mainstream employment cannot succeed. Society cannot eradicate barriers to employment for people with disabilities simply by the integrationist modest approach of reasonable accommodation. A post-integrationist approach may be required to provide legitimate equal employment opportunities for people with disabilities.

In December 2002, the General Accounting Office released its report on its study of three federal business tax incentives to encourage …

The Working Poor Are Paying For Government Benefits: Fixing The Hole In The Anti-Poverty Purse, Francine J. Lipman

Francine J. Lipman

The Brookings Institute and the Progressive Policy Institute have collaborated in a study analyzing the shift of earned income tax credit (EITC) benefits away from the working poor, their families and neighborhoods. The study determined that approximately $1.75 billion of the $30 billion in 1999 EITC was shifted from targeted individuals to paid tax preparers and affiliated national banks. This article analyzes the problem of diminishing EITC benefits for the working poor and presents possible solutions to preserve our nation's largest and most effective anti-poverty program. The proposed solutions include (1) simplification of applicable tax provisions; (2) an offsetting tax …

Never-Ending Limitations On S Corporation Losses: The Slippery Slope Of S Corporation Debt Guarantees, Francine J. Lipman

Francine J. Lipman

The amount of S corporation entity level net operating losses that are allowed to pass through to S corporation shareholders is limited. Shareholders may increase these limits by properly structuring their debt especially shareholder guarantees of S corporation debt. This article focuses on critical shareholder missteps in the recent Tax Court and Seventh Circuit Court of Appeals cases of T.F. Grojean. Because of inadequate tax planning the Grojeans' S corporation pass-through losses were not allowed. The article concludes with a summary of lessons S corporation shareholders can learn from the Grojeans' missteps.

S Corporation Loss Limitations: The Tax Court Provides Potential Hope For Related Party Debt Restructurings, Francine J. Lipman

Francine J. Lipman

This article describes the significant S corporation shareholder basis limitations on pass-through losses. The article focuses on the Internal Revenue Service's (Service) and the courts' strict scrutiny and denial of S corporation shareholder basis when related party debt has been restructured to increase the amount of allowable pass-through losses. The Tax Court, in its recent decision in Culnen v. Commissioner, 79 T.C.M. (CCH) 1933 (2000), rev'd on other grounds, 89 A.F.T.R.2D (RIA) 383 (3d Cir. 2002), has made an affirmative statement that it will not automatically disallow an S corporation shareholder's basis when borrowed funds originate with a related entity. …

Incentive Stock Options And The Alternative Minimum Tax: The Worst Of Times, Francine J. Lipman

Francine J. Lipman

Congress enacted the Alternative Minimum Tax (AMT) to preclude high income individuals from escaping their federal income tax liabilities by artful manipulation of certain tax provisions. In recent years, increasing numbers of moderate-income taxpayers have been subject to AMT. The problem has been especially acute for technology sector employees who exercised incentive stock options (ISOs) while the market was high, sold their stock after its value fell, and found themselves owing AMT they could not afford to pay. This Essay explains the complexity of ISOs and the AMT and argues that the AMT adjustment for ISOs should not be eliminated, …

Avoiding Malpractice Traps In Noncash Charitable Contributions, Francine J. Lipman

Francine J. Lipman

Substance usually rules over form, but form is a very necessary and critical component of any tax practice. This maxim is especially true when taxpayers claim tax deductions for the FMV of their noncash charitable contributions. As the recent Tax Court decision in Hewitt v. Commissioner, 109 T.C. 258 (1997), and that decision's subsequent affirmation, 166 F.3d 332, 98-2 U.S.T.C. (CCH) P50,880 (4th Cir. 1998), demonstrate, taxpayers must follow very detailed and technical rules to substantiate deductions for charitable contributions of property. The Internal Revenue Service and the courts have confirmed that unless taxpayers (and their tax attorneys) follow the …

The New Accountant-Client Privilege Provision: A Partial Step Forward For Nonattorney Practitioners, Francine J. Lipman, James E. Williamson

Francine J. Lipman

For years accountants have argued that nonattorney tax preparers' communications with their clients should be protected by the same privilege that applies to attorney-client communications. Accountants argue that without such privileged confidentiality, clients might be reluctant to disclose information that tax practitioners must have to properly prepare their clients' tax returns. Accountants also believe that to properly represent their clients in tax controversies, their accountant-client communications must be protected. Without such privilege, nonattorney tax practitioners are often hesitant to probe into areas that should be analyzed, because of their legitimate concerns that their accountant-client communications are not protected. On the …

Will Refinancing An Installment Sale Obligation Trigger Recognition Of Gain?, Francine J. Lipman, James E. Williamson

Francine J. Lipman

With the recent decrease in interest rates, many real estate owners are taking the opportunity to improve their financial position by refinancing existing mortgages at the new lower rates. This most recent movement to restructure debt raises an interesting tax question: Will the refinancing of an existing installment sale debt instrument at a lower interest rate, either by changing the terms of the original instrument or by substituting a new debt instrument in place of the original, trigger immediate recognition of the balance of the previously deferred gain for income tax purposes?

Windfall Deductions From Changing Depreciation, Francine J. Lipman, James E. Williamson

Francine J. Lipman

A revenue procedure issued by the IRS may enable real estate managers and owners who have not fully enjoyed the depreciation benefits allowed by tax laws to avail of windfall tax deductions. Revenue Procedure 96-31 allows taxpayers who have made claims lower than the allowable depreciation in previous tax years to automatically change their accounting method for depreciation without user fees. The procedure not only authorizes an automatic change from an impermissible depreciation method or life to a permissible method or life, but also grants the taxpayer the right to subtract the full amount of the difference between the depreciation …

Will Changes To The Passive Income Rules Renew Interest In Real Estate?, Francine J. Lipman, James E. Williamson

Francine J. Lipman

The final regulations under IRC Sec. 469(c)(7) provide guidance on the rental real estate activities of taxpayers engaged in real property trades or business as defined by the Omnibus Budget Reconciliation Bill of 1993. The final regulations do not provide an explicit definition of the phrase "trade or business," but rather state that a taxpayer's real property trades or businesses can be identified using any reasonable method. Because of such ambiguity, rental real estate may become an attractive tax shelter for some investors. The lack of a specific definition of a trade of business may give an opportunity for those …

Will The Final Regulations Under Section 469(C)(7) Renew Taxpayer Interest In Real Estate?, Francine J. Lipman

Francine J. Lipman

Since the 1986 enactment of IRC § 469, which places significant restrictions on how deductions, losses, and credits from a passive activity can be used to offset income from another activity, rental real estate ventures have lost much of their appeal to taxpayers seeking ways to shelter their active and portfolio incomes. However, the 1993 enactment of IRC § 467(c)(7), along with the related final regulations, may allow certain taxpayers, in addition to the real estate professionals specifically targeted by Congress for this relief, to once again offset rental real estate losses against their other taxable income. This article explains …

Avoiding Malpractice Traps In Tax Correspondence And Filings, Francine J. Lipman

Francine J. Lipman

No abstract provided.

Improving The Principal Residence Disaster Relief Provisions, Francine J. Lipman

Francine J. Lipman

In this article, the author proposes a simple statutory solution to an inequity in the disaster relief provisions of the Internal Revenue Code. Using two hypothetical taxpayers, the paper demonstrates that similarly situated disaster-struck taxpayers may not be treated equally. She then analyzes the Service's position in this area, including a discussion of case law in which she focuses on the interactions between sections 1033 and 1034. The author then reviews legislative history to discern Congress's intent when it enacted section 1034. Finally, in her conclusion, the author sets forth a simple statutory amendment to remedy this inequity.

Interest On Estate Taxes: A Comment, Francine J. Lipman, James E. Williamson

Francine J. Lipman

This article illustrates the concepts and the calculations of refundable interest on estate tax overpayments as well as the concepts and the calculations of interest payable on estate tax liabilities.

The New Earned Income Tax Credit: Too Complex For The Targeted Taxpayers?, Francine J. Lipman, James E. Williamson

Francine J. Lipman

In this article, the authors examine the present administrative system for the earned income tax credit (EITC) especially the refinements resulting from enactment of the Omnibus Budget Reconciliation Act of 1990 (OBRA). After describing the problems created by the complexities of the new EITC, the authors conclude that the present system is not working well. They propose that Congress reform the law so that the credit can be used to reduce an employee's liability for Social Security taxes, and refund any excess credit through an addition to take-home pay. The authors believe that the proposed EITC could be administered through …

Tracing The American Concept Of Stewardship To English Antecedents, Francine J. Lipman, James E. Williamson

Francine J. Lipman

The contemporary American concept of stewardship has been criticized for failing to meet the needs of modern society. Critics say that the concept of stewardship is missing or dead in America. This paper proposes that before we speculate on the demise of stewardship in the not too distant future we consider its historical evolution. This paper uses a cross-national approach to trace the concept of stewardship within its socihistorical context from 13th century England to the modern American corporation. By identifying how stewardship has evolved differently in America than it did in England, the authors conclude that stewardship is alive …