Law Commons^™

Recent Developments In Federal Income Taxation, Ira B. Shepard

William & Mary Annual Tax Conference

No abstract provided.

Capturing Capital Gain While Staying In The Deal, Thomas P. Rohman, Todd D. Golub

William & Mary Annual Tax Conference

No abstract provided.

Enforcing Dividend Withholding On Derivatives, Reuven S. Avi-Yonah

Articles

The United States imposes a 30 percent withholding tax on dividends paid to nonresident aliens. However, this tax is rarely paid by portfolio investors because they can swap into U.S. securities, receiving payments to match both capital gain and dividends. Treasury has ruled that swap payments have an origin in the taxpayer’s residence so there is no withholding obligation on payments that match dividends. The proposal would impose withholding tax on dividend equivalents on the ground that there is no policy justification for a distinction between dividends, substitute dividends under securities lending transaction (which are treated as dividends and are …

The Taxation Of Private Equity Carried Interests: Estimating The Revenue Effects Of Taxing Profit Interests As Ordinary Income, Michael S. Knoll

All Faculty Scholarship

In this Article, I estimate the tax revenue effects of taxing private equity carried interests as ordinary income rather than as long-term capital gain as under current law. Under reasonable assumptions, I conclude that the expected present value of additional tax collections would be between 1 percent and 1.5 percent of capital invested in private equity funds, or between $2 billion and $3 billion a year. That estimate, however, makes no allowance for changes in the structure of such funds or the composition of the partnerships, which might substantially reduce tax revenues below those estimates.

Living With Transparency, Robert D. Probasco

Robert Probasco

No abstract provided.

Determining The Character Of Section 357(C) Gain, Fred B. Brown

All Faculty Scholarship

Under section 351, a person transferring property to a controlled corporation generally recognizes no gain or loss on the transaction. An exception to tax-free treatment is contained in section 357(c), which generally provides that a transferor in a section 351 transaction recognizes gain to the extent that any liabilities assumed by the corporation on the transfer exceed the transferor's aggregate adjusted basis in the assets transferred. An issue under section 357(c) is whether the recognized gain should be capital gain or ordinary income. The statute suggests that the character of section 357(c) gain should be based on the character of …

Who's At Risk? Abbott And Costello Take On Section 465, Ajay Gupta

University of Miami Business Law Review

No abstract provided.

The Taxation Of Private Equity Carried Interests: Estimating The Revenue Effects Of Taxing Profit Interests As Ordinary Income, Michael S. Knoll

William & Mary Law Review

In this Article, I estimate the tax revenue effects of taxing private equity carried interests as ordinary income rather than as long-term capital gain as under current law. Under reasonable assumptions, I conclude that the expected present value of additional tax collections would be between 1 percent and 1.5 percent of capital invested in private equity funds, or between $2 billion and $3 billion a year. That estimate, however, makes no allowance for changes in the structure of such funds or the composition of the partnerships, which might substantially reduce tax revenues below those estimates.

Going From The Frying Pan Into The Fire? A Critique Of The U.S. Treasury's Newly Proposed Section 987 Currency Regulations, Joseph Tobin

University of Miami Business Law Review

No abstract provided.

Federal Tax Consequences Of Virtual World Transactions, G. Martin Bingisser

Washington Journal of Law, Technology & Arts

This article discusses the tax consequences of transactions involving Massive Multiplayer Online Role Playing Games (“MMORPGs”). MMORPGs have recently grown in popularity and developed significant economic activity. Virtual goods used in these games are traded for both real and virtual currency. While few dispute that a sale of virtual goods for real currency is a taxable event, more complex tax issues arise concerning transactions that occur solely within virtual worlds. This article analyzes the tax consequences and policy issues surrounding such transactions.

Shelf Project: Amended Returns -- Imposing A Duty To Correct Material Mistakes, T. Keith Fogg, Calvin H. Johnson

T. Keith Fogg

The amended returns proposal would create a duty for a taxpayer to correct material factual errors on its tax return when the error is discovered. Failure to correct an erroneous but innocent representation is considered to be a form of deceit in American tort and contract law.

The Unintended Tax Advantages Of Gay Marriage, Theodore P. Seto

Washington and Lee Law Review

The Internal Revenue Code (the Code) contains numerous special rules applicable to the income taxation of persons related by marriage, birth, adoption, or ownership. This Article suggests a new approach to their analysis. Many basic tax rules assume that taxpayers are self-interested and unaffiliated. Where this assumption is incorrect, the Code makes adjustments to its otherwise applicable rules. Most of the resulting related-party antiavoidance rules apply only in the context of specified formal relationships-marriage, parent/child, or owner/business. The Article tests this thesis by comparing the income tax treatment of heterosexual married couples with that of gay couples in committed long-term …

Shelf Project: National Tax Lien Registry, T. Fogg

T. Keith Fogg

The current system for filing a notice of federal tax lien came into existence before the electronic age. It relies on myriad state laws and the filing of notices in localities more than 4,100 in all. The current system hurts both the IRS and taxpayers by requiring multiple filings and, thus, multiple removals when the underlying obligation is paid or discharged. With increasing complexity comes increasing costs and errors for the IRS, taxpayers, and taxpayers' creditors. A single Web-based system would be cheaper and more efficient. That possibility drives this recommendation.

Will The Tax Man Cometh To Coach Rodriguez?, Jeffrey H. Kahn, Douglas A. Kahn

Scholarly Publications

No abstract provided.

Will The Tax Man Cometh To Coach Rodriguez?, Douglas A. Kahn, Jeffrey H. Kahn

Articles

There has been much in the news recently about coaches of major college sports teams moving to a new school and incurring an obligation to make payment to their old school under a buyout provision in their contract. The most recent example is the highly publicized move of Richard Rodriguez from West Virginia University to the University of Michigan. Coach Rodriguez had a contract with his former employer that required him to pay $4 million dollars to West Virginia if he left for another coaching position. After a suit was filed, it was reported that the parties agreed that the …

Give The Tax Court Transfer Power And Plenary Civil Tax Jurisdiction, Steve R. Johnson

Scholarly Publications

A recent decision again raises questions about the powers that the Tax Court does and should possess. In Mobley v. Commissioner, No. 07-2019 (6th Cir. July 8, 2008), Doc 2008-14970, 2008 TNT 132-13, the Sixth Circuit affirmed a procedural decision of the Tax Court. The Tax Court dismissed a petition because it lacked jurisdiction, and it rejected the taxpayers’ request to transfer the case to a district court. The Tax Court concluded, and the Sixth Circuit agreed, that the Tax Court lacks transfer power. Under 28 U.S.C sections 1631 and 610, the power to transfer cases is conferred only upon …

Federal Taxation, Michael H. Plowgian, Svetoslav S. Minkov, Mark S. Davis

Mercer Law Review

The courts in the Eleventh Circuit heard a number of relatively prominent tax related cases in 2007. In United States v. Mount Sinai Medical Center of Florida, Inc., the Eleventh Circuit held that medical residents are potentially eligible for the student exemption from social security taxes, with their eligibility being determined on a case-by-case basis. In Estate of Jelke v. Commissioner, the Eleventh Circuit vacated the United States Tax Court's valuation methodology in computing, for estate tax purposes, the net asset value of a holding company in which the decedent held a minority interest. The Eleventh Circuit held …

Tercer Congreso Nacional De Organismos Públicos Autónomos, Bruno L. Costantini García

Bruno L. Costantini García

Tercer Congreso Nacional de Organismos Públicos Autónomos

"Autonomía, Reforma Legislativa y Gasto Público"

Study Of The Role Of Preparers In Relation To Taxpayer Compliance With Internal Revenue Laws, Leslie Book

Working Paper Series

The use of paid tax return preparers has grown steadily. All paid return preparers, including those who are not regulated by any licensing entity or subject to competency or continuing education requirements, must comply with certain requirements in connection with the preparation of a tax return, including signing the return and providing a copy of the return to taxpayers. Preparers are also subject to civil and even criminal penalties for improper conduct and the Code provides that the United States may bring a civil action to enjoin tax preparers if preparers engage in certain types of impermissible conduct. As discussed …

Democracy And Opportunity: A New Paradigm In Tax Equity, James R. Repetti

Vanderbilt Law Review

Academics and policymakers pay little attention to the interaction of a tax system with the objectives of a just government. For example, in the debate about whether the United States should retain an income tax or adopt a consumption tax, most discussions focus on the relative efficiency and equity of the taxes. Proponents of a consumption tax worry that an income tax is inefficient because it burdens investment income. Advocates of an income tax fear that a consumption tax is not equitable because low-income taxpayers consume a greater percentage of their income than wealthy taxpayers. These concerns date at least …

Corporate Taxation And International Charter Competition, Mitchell A. Kane, Edward B. Rock

Michigan Law Review

Corporate charter competition has become an increasingly international phenomenon. The thesis of this Article is that this development in corporate law requires a greater focus on corporate tax law. We first demonstrate how a tax system's capacity to distort the international charter market depends both upon its approach to determining corporate location and upon the extent to which it taxes foreign source corporate profits. We also show, however, that it is not possible to remove all distortions through modifications to the tax system alone. We present instead two alternative methods for preserving an international charter market. The first-best solution involves …

Corporate Taxation And International Charter Competition, Mitchell Kane, Edward B. Rock

All Faculty Scholarship

Corporate Charter competition has become an increasingly international phenomenon. The thesis of this article is that this development in the corporate law requires a greater focus on the corporate tax law. We first demonstrate how a tax system’s capacity to distort the international charter market depends both upon its approach to determining corporate location and the extent to which it taxes foreign source corporate profits. We also show, however, that it is not possible to remove all distortions through modifications to the tax system alone. We present instead two alternative methods for preserving an international charter market. The first best …

Valuation Discounting Techniques: Terms Gone Awry, Wendy G. Gerzog

All Faculty Scholarship

Fair market value is defined in the section 2031 Regulations. For its validity, that definition of fair market value relies on the normal definitions of its significant terms: a seller is someone who is seeking the highest price for her product and a buyer is someone who wants to obtain the lowest price for his purchase. It is only that tension that creates the realistic, and fair, market value of that asset. Indeed, without that conflict, the definition is comprised of hollow words.

In the context of family limited partnerships, terms have been misused. By utilizing the limited partnership shell, …

Federal Fairness To State Taxpayers: Irrationality, Unfunded Mandates, And The "Salt" Deduction, Brian Galle

Michigan Law Review

By sheer dollars alone, the largest impact of the Alternative Minimum Tax is to deny many taxpayers the deduction for the taxes they paid to their state and local governments under § 164 of the Internal Revenue Code. This Article provides a fine-grained analysis of the overall fairness of the state-andlocal- tax deduction--and, by implication, the fairness of its partial repeal through the Alternative Minimum Tax. I offer for the first time a close examination of how newly understood limits on taxpayer mobility and rationality might affect individuals' choices of bundles of local taxes and localgovernment services, which in turn …

Retention Requirements For Tax Records, Robert D. Probasco

Robert Probasco

No abstract provided.

Advocacy Groups Plead With Congress To Reauthorize The Secure Rural Schools And Community Self-Determination Act, Nigel D. Graham

Public Interest Law Reporter

No abstract provided.

A Coherent Policy Proposal For U.S. Residence-Based Taxation Of Individuals, Cynthia Blum, Paula N. Singer

Vanderbilt Journal of Transnational Law

Taxation of the worldwide income of U.S. citizens has been a feature of the U.S. income tax since the Revenue Act of 1913. This Article proposes that the United States abandon its imposition of income tax based on citizenship and institute a new system for taxing individuals based solely on residence. This includes (1) a revised definition of "residency status" that would be based on physical presence and be monitored through an entry-exit system, (2) a proposal for an exit tax imposed on termination of residence with respect to unrealized appreciation accrued during the period of residence, and (3) new …

Back To The Future? The Potential Revival Of Territoriality, Reuven S. Avi-Yonah

Articles

Since 1994, the trend in the United States and other developed countries appears to be to reduce the scope of residence jurisdiction and increase the emphasis on source jurisdiction. If this trend continues, these countries are likely to move toward territoriality and decrease the emphasis on their CFC rules. In the author’s opinion, the reason for this trend is political and economic, not legal. It is part of tax competition, specifically the competition to be the headquarters jurisdiction for multinationals. The author also thinks, however, that it is not necessary to go down this road because the solution to the …

The Tax Treatment Of Advance Receipts, David Hasen

Publications

Under the present income tax, some advance receipts are neither taxable on receipt nor deductible on repayment, while others are taxable when received and deductible when repaid or paid for. From a purely theoretical perspective, it remains unclear why different sets of rules apply in different cases. For example, if the fact of unrestricted control over the payment compels the conclusion that it is income, then most advance receipts, including loan proceeds, should be included in income immediately. Conversely, if the presence of an offsetting liability compels the conclusion that the payment is not (yet) income, then most advance receipts, …

Unwinding Unwinding, David Hasen

Publications

"Unwinding" is a common, if not ubiquitous, feature of tax practice. In a successful unwind, parties to a prior transaction or arrangement back out of it by means of a later transaction and are treated for tax purposes as having engaged in no transactions at all. In a failed unwind, the parties undertake the later transaction, but it is not treated as nullifying the effects of the first transaction; rather, two separate transactions are deemed to have taken place, each with its own tax consequences.

This Article develops the first unified theoretical framework for analyzing tax unwinding. It also provides …