Tax Law Commons^™

When Fungible Portfolio Assets Meet: A Problem Of Tax Recognition, Alan L. Feld

Faculty Scholarship

A pervasive principle in calculating income for Federal tax purposes defers consideration of gain or loss in an investment asset until a recognition event occurs. An investor can watch the value of an investment in common stock rise over a considerable period of time without incurring any tax liability. Similarly, if the value declines, the investor does not take the loss into account. When the investor terminates the investment, the tax computation takes the net accumulated gain or loss into account at that time.

Discussion and controversy concerning this deferral principle, referred to as the realization or recognition requirement,^{1 …}

Is Firpta (Partially) Obsolete?, Alan L. Feld

Faculty Scholarship

The Treasury's recent list of Subchapter C issues for study contained a long section on foreign matters. Although the section twice mentioned FIRPTA, it did not treat FIRPTA itself as a subject for reevaluation in the light of the 1986 Act. It should have. Repeal of the General Utilities principle rendered the corporate provisions of FIRPTA largely obsolete. The continuing effects of the FIRPTA rules should be considered against the background of the new corporate tax rules.

Redeployment Of Tax Expenditures For Housing, Alan L. Feld

Faculty Scholarship

This article assesses housing-related tax expenditures and evaluates some of the proposals for changes in these programs, so as to make better use of tax aids for housing.

Indirect Aid To The Arts, Michael O'Hare, Alan L. Feld

Faculty Scholarship

Most government support of arts institutions is indirect—the result of charitable deduction provisions of the federal income tax, property tax exemptions extended by local governments, and other tax provisions. The money that government forgoes through these provisions must be made up by higher taxes for all taxpayers. The public, however, has little say about how these funds are spent. By its very nature, the income tax deduction places the decision-making power over arts institutions in the hands of those with high incomes. Those with high incomes receive a greater tax benefit for each dollar they contribute, increasing the amounts they …

Fairness In Rate Cuts In The Individual Income Tax, Alan L. Feld

Faculty Scholarship

The Economic Recovery Tax Act of 1981 (the 1981 Act) made significant changes in federal income, estate, and gift taxation, touching virtually every taxpayer.¹ The centerpiece of the 1981 Act consisted of rate reductions in the individual income tax.² These reductions, said to average 23%, served a number of different but related objectives. First, those in favor of the tax cuts posited that all taxpayers would benefit from equitable, across-the-board reductions in an excessive and growing tax burden.³ Related to this objective was an anticipated reduction in the size of the federal government, because less tax money …

The Tax Benefit Of Bliss, Alan L. Feld

Faculty Scholarship

In recent years the Supreme Court has limited its substantive decisions in federal income tax matters.^I For the most part, the handful of tax cases it has considered each year deal with collection, liens, or other issues peripheral to doctrinal development in the tax area.² The Court's recent decision in Diedrich v. Commissioner,³ however, dealt with a realization question involving net gifts; and its grant of certiorari consolidating the cases of Bliss Dairy, Inc. v. United States and Hillsboro National Bank v. Commissioner⁴ promises a continuing interest in substantive tax law. Bliss Dairy will enable the …

Artists, Art Collectors And Income Tax, Alan L. Feld

Faculty Scholarship

The federal income tax law treats artists and art collectors differently. Similar transactions concerning artworks produce disparate income tax results, depending on whether they involve the artist or the collector. On balance, these results seem to favor the collector over the artist. But notwithstanding the dismay of some artists and their advocates, the differences in result flow, in the main, from the differences in the source of the taxpayer's investment in the work.

The collector buys the work with after-tax income. Any gain is properly treated as an investment return and is eligible for capital gain benefits.' The collector, however, …

The Artist's Tax Dilemma, Wendy J. Gordon

Scholarship Chronologically

An artist's first job is to create. Somewhere down the line, most artists find they have a second job, which is to sell. Many artists resist involvement in the second task (with mixed results), yet beyond it the artist encounters a duty even more dreaded: to pay taxes.

Carryover Basis: An Observation, An Irony, And A Proposal, Alan L. Feld

Faculty Scholarship

Alan L. Feld is a Boston University Law School professor and visiting professor at the University of Pennsylvania Law School. In this article Feld describes the changes in the treatment of capital gains transferred at death that were enacted in the Tax Reform Act of 1976. Feld notes that tax reformers would have preferred to tax capital gains at death but accepted the carryover basis provision as a second-best solution.

He reports that in the case of the very largest estates, the combined, effect of carryover basis and the lower estate tax rates results at most in a total estate …

Divorce, Tax-Style, Alan L. Feld

Faculty Scholarship

In response to the "sham divorce" tactic, the IRS recently issued Revenue Ruling 76-255. The author, professor of law at Boston University School of Law, although sympathetic with the IRS's position in the Ruling, poin4s out situations where the divorce-remarriage may possibly be considered valid because of the existence of nontax effects.

Implications Of Minority Interest And Stock Restrictions In Valuing Closely-Held Shares, Alan L. Feld

Faculty Scholarship

The federal estate and gift taxes levy on the gratuitous transfer of wealth by both testamentary and lifetime disposition. The amount of the tax depends on the value placed on the property transferred by the decedent or donor. When the property transferred consists of shares of stock in a closely held corporation, there often exists no ready market to help in valuation. As a result, the value of the shares used to compute the federal estate or gift tax must be determined first by appraising the value of the enterprise, and then by allocating some portion of that value to …

Another Word On Child Care, Alan L. Feld

Faculty Scholarship

Professors Schaffer and Berman have written a stimulating brief in support of a deduction for child care expenses in computing federal taxable income. But, in addition, by the range of considerations which their article takes into account, it illustrates the difficulty in opting for deductibility or nondeductibility on the basis of a rational consideration of income tax policies. The difficulty derives primarily from the fact that child care expenditures partake of both a personal (consumption) element and a business (income earning) element.¹ To the extent it represents the latter, it does not represent personal income appropriately subject to tax; …

Deductibility Of Expenses For Child Care And Household Services: New Section 214, Alan L. Feld

Faculty Scholarship

It is increasingly common to find families composed of husband, wife and young children, where both husband and wife are gainfully employed. For some, this pattern is regarded as preferable to the older "ideal" family, where the husband was the sole breadwinner and the wife cared for the children, performed household chores and perhaps engaged in social or charitable activities. Where both spouses are gainfully employed, it is often necessary for the family to employ household help to care for the children and do the housework. These expenditures are "necessary" to the gainful employment of both spouses in the sense …