Law Commons^™

Cancellation-Of-Indebtedness Income And Transactional Accounting, Lawrence A. Zelenak

Faculty Scholarship

More than three-quarters of a century after the Supreme Court’s decision in United States v. Kirby Lumber established that the cancellation of a debt produces taxable income, there is still uncertainty - both in the courts and among commentators - concerning the rationale for the taxation of cancellation-of-debt (COD) income. Is the taxation of COD income based on the simple fact that the cancellation of a debt improves the taxpayer’s balance sheet, thus increasing the taxpayer’s net worth in the year of cancellation? Or is it based on a multi-year perspective, in which inclusion of the cancelled debt in income …

Elimination Of The Deduction For Business Entertainment Expenses, Richard L. Schmalbeck, Jay A. Soled

Faculty Scholarship

The proposal is offered as a part of the Shelf Project, a collaboration by tax professionals to develop and perfect proposals to help Congress when it needs to raise revenue. Shelf Project proposals are intended to raise revenue without raising tax rates because the best systems have taxes that are unavoidable to reach the lowest feasible tax rates.

This proposal would deny deductions for all business entertainment expenses. Also, the definition of the term ‘‘entertainment’’ would be narrowed so that expenses that are incurred in a clear business setting and are deeply rooted in producing immediate income or in mining …

Tax Policy And Personal Identity Over Time, Lawrence A. Zelenak

Faculty Scholarship

Tax policy analysts often claim that tax distributional analysis should be based on a lifetime perspective, at least as a theoretical ideal. A prominent argument in favor of a consumption tax base over an income tax base appeals to this lifetime equity perspective, as does the argument for lifetime income averaging under an income tax with progressive marginal rates. These appeals to lifetime equity assume, in most cases without discussion, that personal identity over time is an unproblematic concept, so that the whole-life person is clearly the ideal unit for purposes of distributional analysis. However, the philosopher Derek Parfit claims …

Tax Enforcement For Gamers: High Penalties Or Strict Disclosure Rules?, Lawrence A. Zelenak

Faculty Scholarship

This essay responds to Alex Raskolnikov’s proposal to replace the current federal income tax compliance regime with a two-track approach based on taxpayer choice. The “deterrence regime” (DR) would be designed to be chosen by “gamers”, and the “compliance regime” (CR) would be designed to be chosen by all other taxpayers. Penalty rates would be significantly higher in the DR than in the CR. In this response, Lawrence Zelenak notes that the tax shelter disclosure rules of current law can also be viewed as a way of imposing a special compliance regime-featuring high odds of detection rather than high penalty …