Tax Law Commons^™

Taxation - Federal Income Tax - Meals And Lodging Under The 1954 Code, John H. Mcdermott

Michigan Law Review

Before discussing the application of the 1954 Internal Revenue Code with regard to the taxability of meals and lodging furnished an employee by his employer, several fundamental tax concepts should be examined. The first of these involves the definition of gross income, which for many years has been cast in broad statutory language. For example, section 22(a) of the 1939 Internal Revenue Code provided that gross income includes " ... gains, profits, and income derived from salaries, wages, or compensation for personal service ... of whatever kind and in whatever form paid .... " Comprehensive as these terms appear, gross …

Lore: How To Win A Tax Case, John J. Raymond

Michigan Law Review

A Review of How to Win A Tax Case. By Martin M. Lore

Taxation - Federal Income Taxation - Problems Created By The Complex Trust Provisions Of The 1954 Code, Harvey A. Howard S.Ed.

Michigan Law Review

This comment will not be expository of all of the trust provisions but rather will attempt to deal with some of the more important interpretative difficulties likely to be encountered in the new law involving the taxation of the income of those trusts which may accumulate income, distribute corpus, or pay or set aside amounts for charitable purposes. It will be assumed that the reader is familiar with the basic statutory pattern of the trust sections of the new code.

Taxation - Federal Income Tax - Corporate Accumulations, Stock Dividends And The "Preferred Stock Bail-Out," And Taxability Of The Corporation Upon The Distribution Of "Inventory Assets" Under The Internal Revenue Code Of 1954, Alice Austin S.Ed.

Michigan Law Review

It is the purpose of this discussion to indicate, with respect to corporate accumulations and distributions, some of the major interpretative problems existing under the 1939 code which Congress has failed to resolve, as well as some of the major interpretative difficulties which arise for the first time under the 1954 code.

Taxation - Federal Income Tax - Extent To Which A Dividend In Kind Is Ordinary Income Under The Internal Revenue Code, Alice Austin S.Ed.

Michigan Law Review

Taxpayer, a corporate shareholder, received from the corporation a distribution of property which had appreciated in value over its adjusted cost. The earnings and profits of the corporation were sufficient to cover the adjusted cost of the property distributed, but were not sufficient to cover its full fair market value at the time of distribution. The Tax Court held that the fair market value of the distribution was taxable as a dividend only to the extent of the corporation's earnings and profits. On appeal, held, reversed. In determining whether a distribution in kind is a dividend under section 115(a), …

Obligations Of A State-Created Authority: Do They Constitute A Debt Of The State, Elizabeth Gaspar Brown

Michigan Law Review

Although provisions in a number of state constitutions limit the amount of debt a state may incur state legislatures frequently have attempted to circumvent such limitations. Recent decades have seen increased use of the "authority," set up by the legislature to accomplish a particular objective and given power to issue evidences of indebtedness to finance the objective, repayment to come from the revenues of the authority, with the declaration that the obligations of the authority are not those of the state. The enabling legislation has been challenged as unconstitutional, often on the ground that the obligations of the authority are …

Michigan Title Examinations And The 1954 Revenue Code's New General Lien Provisions, L. Hart Wright

Michigan Law Review

Title examiners, and more particularly their clients, have long suffered from a controversy-limited almost exclusively to Michigan- involving the methods by which the United States Treasury Department could perfect general federal tax liens. The December 1952 issue of the Michigan Law Review carried an article by the present writer pointing up the irreconcilable difference which has existed for a quarter of a century between the type of record notice which the Treasury was willing to provide prospective bona fide purchasers et al., and the quite different and more demanding type which the Michigan Legislature insisted upon if the local offices …

Constitutional Law - Due Process - Enforced Collection Of State Use Tax From Nonresident Vendor, John Leddy S.Ed.

Michigan Law Review

Appellant is a Delaware corporation engaging in the retail furniture business in Delaware. It has no place of business in Maryland, nor does it solicit orders in that state. It does not accept mail or phone orders from Maryland, nor does it advertise in any Maryland publications. The only contacts which the appellant has with Maryland customers, aside from direct dealings at appellant's retail store, are occasional direct mail advertisements, which it sends to all of its customers wherever located, and deliveries of goods purchased by Maryland customers. These deliveries are either made by commercial carrier or by appellant's own …

Jacobs: Law Writers And The Courts, Richard. A. Edwards

Michigan Law Review

A Review of Law Writers and the Courts. By Clyde E. Jacobs

Taxation - Federal Income Tax - Deferred Compensation As Affected By Constructive Receipt Doctrine, David D. Dowd, Jr. S.Ed.

Michigan Law Review

Prior to his retirement as a general agent of a life insurance company, the petitioner entered into a new contract with the company by which he was to receive upon retirement fixed monthly instalments for fifteen years in lieu of his original contract rights to receive renewal premium commissions as they were paid into the company. Petitioner, as a cash basis taxpayer, reported as income only the instalments received. The Commissioner assessed deficiencies in the reports, contending that petitioner's taxable income consisted of all renewal commissions received by the company during the taxable year, rather than the instalment payments. Rejecting …

Taxation-Federal Income Tax-Limited Deductibility Of Entertainment Expenses, David W. Belin S.Ed.

Michigan Law Review

In the sophisticated commercial world of today there are many expenses that might be termed of a "mixed complexion," having elements of both a business and non-business character. Nowhere is this better exemplified than in the area of entertainment expenses. Though one may assume that it should be the policy of the courts to allow full and fair deduction of business expenses in general, many difficulties arise regarding expenditures for entertainment purposes. In virtually all entertainment there is personal enjoyment of a social nature by the taxpayer as well as potential business value. Furthermore, what business value there is will …

Evidence-Presumtions-Alabama Statute Making Compliance With Federal Wagering Tax Law Prima Facie Evidence Of Violation Of State Gambling Law, John C. Hall S.Ed.

Michigan Law Review

In 1953 the Alabama legislature, taking advantage of the federal occupational tax on professional gamblers, enacted legislation making possession of the federal wagering tax stamp prima facie evidence of violation of the state gambling laws.

Corporations - Effect Of Domestication Statute On Foreign Corporations, J. David Voss S.Ed.

Michigan Law Review

Plaintiff brought suit to enjoin the collection of a state tax on intangibles consisting of stocks held by plaintiff in domesticated foreign corporations. The lower court enjoined the defendant, a county treasurer, from collecting the tax. On appeal, held, reversed, three judges dissenting. A foreign corporation which has complied with the Nebraska domestication statute is a foreign corporation for purposes of the Nebraska intangibles tax. Omaha Nat. Bank v. Jensen, (Neb. 1953) 58 N.W. (2d) 582.

Taxation - Federal Income Tax - Deductibility Of Expenses Incurred By Attorney In Attending Tax Institute, John E. Riecker S.Ed.

Michigan Law Review

Petitioner was a member of a firm of lawyers engaged in general practice in Binghamton, New York. The firm did enough work in federal taxation to warrant petitioner's specializing in this field, and his partners relied upon him to keep abreast of all significant developments in tax law. Petitioner attended the Fifth Annual Institute on Federal Taxation, conducted in New York City under the sponsorship of New York University and designed exclusively for practitioners and specialists in the tax field. He incurred expenses for travel, board, lodging, and tuition, all of which he deducted as ordinary and necessary business expenses …

Taxation - Federal Income Tax - Exchange Of Debentures For Preferred Stock As Tax-Free Reorganization, Raymond R. Trombadore S.Ed.

Michigan Law Review

Plaintiff held common and preferred stock of the Gulf States Paper Corporation. In 1942 plaintiff received new debentures in exchange for his preferred stock, pursuant to a plan for the recapitalization of the company whereby the entire 25,000 shares of previously outstanding preferred stock (including plaintiff's 208 shares) were exchanged for new debentures of like value. In 1950 the Commissioner assessed an income tax deficiency against plaintiff, determining that the redemption and cancellation of the preferred stock represented a distribution essentially equivalent to the distribution of a dividend and taxable under section 115(g)(1) of the Internal Revenue Code. Plaintiff sued …

Taxation - Federal Income Tax - Deductibility By An Employee Of Sum Paid In Settlement Of Claim Arising From His Operation Of Automobile Used In Company's Business, Richard B. Barnett S.Ed.

Michigan Law Review

Petitioner and one Elkins were employed by a corporation which they had organized to engage in the electrical contracting business. They furnished their own automobiles to transport men and material from job to job, and were reimbursed by the corporation for operating expenses. The corporation also paid for insurance and repairs of the automobiles. While Elkins was using petitioner's car to drive two employees to a job in progress, a collision occurred causing personal injuries to the two employees, who recovered a judgment against petitioner which he finally settled by payment of $4,000 in excess of the amount of the …

Constitutional Law - Congressional Powers - Validity Of The 1951 Gamblers' Occupation Tax Act, James W. Callison S.Ed.

Michigan Law Review

The Revenue Act of 1951 levied a tax on persons engaged in the business of accepting wagers, requiring such persons to register their names and places of business and residence with the Collector of Internal Revenue. The act also required the disclosure of the name and address of each person receiving wagers for the registrant, or, if the registrant himself received wagers for another, the name of that person. Violations of the act were punishable by fine and imprisonment. Defendant was indicted for willful failure to register and pay the tax. The district court granted defendant's motion to dismiss on …

Taxation - Federal Income Tax - Consequences To Seller And Buyer Of Covenant Not To Compete, Richard B. Barnett S.Ed.

Michigan Law Review

The owners of the entire capital stock of a newspaper business received an offer of $1,000,000 for their stock and a covenant not to compete with buyers for ten years. After the offer was accepted and the contract of sale drawn up, buyer asked for a clause in the contract evaluating the covenant not to compete at $50 a share and the stock at $150 a share in order to help him taxwise. The clause was accepted with little discussion. The sellers reported the entire proceeds of the sale on their income tax returns as long term capital gain, but …

Taxation - Federal Income Tax - Exemplary Damages As Taxable Income To Recipient, Eliot Gerber S.Ed.

Michigan Law Review

Petitioner, a motion picture exhibitor, sued certain motion picture distributors under the private remedy provisions of the federal antitrust acts. Judgment was had against the distributors for treble damages. Upon failure of petitioner to report as income the amount recovered above its actual loss of profits, the Commissioner determined deficiencies in petitioner's income tax. Held, the amount recovered above actual loss of profits was exemplary damages and not taxable income. William Goldman Theatres, Inc., 19 T.C. 637 (1953).

Notes, Michigan Law Review

Michigan Law Review

The information given in the notes is derived from inspection of the books, publishers' literature, and the ordinary library sources.

Taxation - Federal Income Tax-What Constitutes Accident Or Health Insurance Under Section 22(B)(5)-, Marvin O. Young

Michigan Law Review

Plaintiff brought this action to recover federal income tax paid by him for the year 1945 on a sum of $1800 which plaintiff received from his employer pursuant to a "free" sickness benefits plan which plaintiff's employer had in effect, claiming that this amount was excludable from gross income under section 22(b)(5) as "amounts received through accident or health insurance." Plaintiff's employer was an insurance company with authority to write health and accident insurance, and "free" protection was given to all full-time salaried home and branch office employees who could pass a satisfactory medical examination. Many ordinary features of a …

Taxation-Federal Income Tax-Constitutionality Of The Clifford Regulations, Robert G. Russell S.Ed.

Michigan Law Review

Taxpayer created a five year irrevocable trust on December 1, 1941 for the benefit of a charitable foundation. She retained a reversion in the corpus but disclaimed any right to income. She did not retain, directly or indirectly, any interim control over the corpus or income. On December 1, 1942 the term of the trust was extended to December 1, 1951. Taxpayer did not report the income of the trust in her return. The Commissioner assessed deficiencies for 1946 claiming that the trust was for a term of nine years and that under the new ten year rule, the income …

Judicial Techniques In Combating Tax Avoidance, Ralph S. Rice

Michigan Law Review

There is no problem today more fundamental in federal tax law than the rationale (or lack of it) that underlies the conduct of the courts in striking down tax avoidance devices and refusing to recognize business arrangements which meet statutory requirements for tax saving but exude an odor piscatorial.

Taxation-Federal Income Tax-Payment To Lessee For Surrender Of Lease Taxable As Capital Gain, Theodore J. St. Antoine

Michigan Law Review

Taxpayer, a tenant in possession of premises under a lease, received a payment from the lessor to vacate and surrender the premises before the lease expired. The Tax Court decided that the payment was taxable only as a capital gain. On appeal, held, affirmed. Since the leasehold interest constituted property, its transfer by the lessee to the lessor was a sale of a capital asset under I.R.C., §117. Commissioner v. Golonsky, (3d Cir. 1952) 200 F. (2d) 72.

Constitutional Law-Relation Between State And Federal Governments, J. David Voss

Michigan Law Review

Plaintiffs, employees of a United States Naval Ordnance Plant located in an area of exclusive federal jurisdiction within the State of Kentucky, sued in a state court for a declaratory judgment that a license tax on the privilege of working in the City of Louisville, measured by a percentage of all salaries, wages and commissions earned within the city, was not applicable to them. Defendants' demurrer was overruled, and the collection of the tax enjoined. The Kentucky Court of Appeals reversed, and judgment was entered for the defendants. The court of appeals affirmed. On appeal to the United States Supreme …

Taxation-Federal Income Tax-Status Of Payment Of Corporate Liability By Stockholder Subsequent To Liquidation, George V. Burbach S.Ed.

Michigan Law Review

Petitioners, from 1937 to 1940, received distributions from the liquidation of a corporation of which they were stockholders and reported the profits thus obtained, classifying them as capital gains pursuant to I.R.C., §115. In 1944, a judgment was rendered against the corporation. Petitioners, as transferees, paid the judgment and took a deduction of 100 per cent, classifying the amount paid as an ordinary business loss. The Commissioner took a contrary position, and held the payment a capital loss. The Tax Court upheld the petitioners' contention but the court of appeals reversed. On appeal, held, affirmed, three Justices dissenting. The …

Municipal Corporations--Charter Amendment-Submission Of Three Propositions In The Form Of One Question, Joseph M. Kortenhof S.Ed.

Michigan Law Review

The council of defendant city adopted a resolution whereby the city charter was to be amended to authorize a limitation of I% per annum on property taxes, an excise tax of 1% per annum on salaries, commisions and profits of both nonresidents and residents, and disposition of the monies received by the income tax. The proposed charter revision was approved by the qualified electors by a margin slightly less than two to one. The plaintiffs, electors and residents of the city, obtained an injunction against enforcement of the charter amendment. On appeal, held, affirmed. The charter revision was ineffectual …

Taxation-Collection And Enforcement-Action Against Collector Of Internal Revenue Not The Proper Method Of Removing Federal Tax Liens, John Houck S.Ed.

Michigan Law Review

Plaintiff's property was under a federal tax lien. He brought suit in the district court against the Collector of Internal Revenue, alleging fraudulent issuance of the lien and seeking removal and damages occasioned by the cloud on his title. The collector moved to dismiss on the grounds that no claim was stated upon which relief could be granted, and further, that the collector was not the proper party defendant, while the United States, which had not been joined, was indispensable to the proceeding. Held, petition dismissed. The court found no indication of fraud, but even assuming fraud to exist, …

Title Examinations In Michigan As Affected By The General Federal Tax Lien, L. Hart Wright

Michigan Law Review

There are three federal tax liens which serve to haunt the average title examiner. The first of these is pitched at the wholesale level; it is a shotgun type lien applicable to all federal taxes and is now provided for by section 3670 of the Internal Revenue Code. The second and third are not nearly so sweeping. One is confined to the federal estate tax, being provided for by section 827 of the code, while the other reinforces the federal gift tax and is the product of section 1009 of the code.

The discussion which follows deals only with the …

Apportionment Of The Federal State Tax In The Absence Of Statute Or An Expression Of Intention, William P. Sutter

Michigan Law Review

Federal law now provides in sections 826 (c) and (d) of the Internal Revenue Code that life insurance and property transferred by appointment shall bear their proportionate tax burden. It does not contain similar provisions with respect to other types of non-probate property. At the present time, twenty states provide by statute for some sort of apportionment of estate taxes. Two states have statutes restricting apportionment in some degree. In the rest, the matter rests in the discretion of the courts. I propose to discuss in this article the situation in those areas where no statutory guidance exists.