Tax Law Commons^™

Estate Freezes After The Revenue Act Of 1987, Ronald D. Aucutt

Akron Tax Journal

Last December, while tax professionals were still grappling with the Tax Reform Act of 1986, Congress passed the Revenue Act of 1987. Some Christmas present!

One of the most significant casualties of the 1987 Act was the popular planning tool known as the estate "freeze." For decedents' estates originating after December 31, 1987, any "freeze" completed after December 17, 1987 will be covered by the new law There is no transition rule for transactions in progress.

Pac Contributions And Effective Corporate Tax Rates: An Empirical Study, Jonathan Barry Forman

Akron Tax Journal

It is commonly asserted that such large corporations have used political influence to secure special tax benefits to reduce their respective tax liabilities. The present study investigates whether, in fact, there is a relationship between corporate political influence and corporate tax liabilities. Specifically, this study examines the relationship between corporate political action committee (PAC) contributions made during the 1983-1984 election cycle and the effective corporate tax rates imposed on the related corporations in 1985.

Passive Activity Losses In Light Of The New Section 469 Temporary Regulations, Hans-Dieter Sprohge

Akron Tax Journal

The Tax Reform Act of 1986 created Internal Revenue Code (I.R.C.) Section 469.' The purpose of this Section is to prevent certain taxpayers from sheltering income with non-cash losses from businesses in which the taxpayers do not participate. The new Regulations are intended to provide taxpayers with guidance on compliance with the rules of Section 469. Taxpayer compliance is difficult for two reasons: First, the Regulations do not address some of the key Section 469 concepts and rules. The Section 469 concepts and rules omitted by the first set of Section 469 Regulations will be discussed in future regulations. The …

Coverage Flexibility For Qualified Retirement Plans After The Tax Reform Act Of 1986, Richard J. Kovach

Akron Tax Journal

The Tax Reform Act of 1986 substantially changed the participation coverage criteria for qualified retirement plans. The purpose of this article is to set forth selected observations about the problems and opportunities that now exist respecting planning for coverage exclusions under the Internal Revenue Code Accordingly, this article will consider both surviving concepts from prior law and new rules that emerge from the 1986 Tax Act.

Report On Transfer Tax Restructuring, K. Jay Holdsworth, Ronald D. Aucutt, Edward B. Benjamin Jr., Kenneth W. Bergen, James B. Lewis

Akron Tax Journal

This report is submitted to the Council of the Section of Taxation, American Bar Association as a proposed response to the request of the Treasury Department for suggestions for reform of the Federal transfer taxes (the estate, gift, and generation-skipping transfer taxes). That request was contained in a letter dated November 19, 1985, from Ronald A. Pearlman, the Assistant Secretary (Tax Policy), to Hugh Calkins, then Section Chair.' After receiving individual comment papers on the subject from members of the Section's Committee on Estate and Gift Taxes, Mr. Calkins, on April 14, 1986, created this Task Force and asked it …

Custodial Parent Dependency Exemptions: Hughes V. Hughes, Amanda Spies Bornhorst

Akron Tax Journal

In 1984, Congress amended Internal Revenue Code (I.R.C.) Section 152(e) to create an unambiguous presumption in favor of the custodial parent receiving the dependency exemption(s). The language of Code Section 152(e) expressly provides that the custodial parent may release his/her presumptive right to the noncustodial parent if the custodial parent signs a written declaration to that effect On its face, however, Section 152(e) does not provide a state domestic relations court with the power to order the custodial parent to execute the release. Yet, it is this very power which the domestic relations courts of several states, including Ohio, are …

Traveling Expenses To Temporary Job Sites Kohr V. United States Walraven V. Commissioner, John Ney

Akron Tax Journal

The issue addressed in this update is the current status of the deductibility of traveling expenses to temporary job sites. The analysis is a comparison of two recent cases: Kohr v. United States I and Walraven v. Commissioner.' Kohr involves the granting of a summary judgment in favor of the taxpayer from the District Court. In Walraven, the Eighth Circuit affirmed a Tax Court ruling in favor of the Commissioner of Internal Revenue. Both cases involve construction workers who maintained residences that were considerable distances from their employment. Both were employed at a nuclear power plant construction project, and both …

Constructive Receipt Of Income Baxter V. Commissioner, Adam M. Ekonomon

Akron Tax Journal

In Baxter v. Commissioner, the court decided whether taxpayer Baxter had constructively received $13,095 of commissions he had earned in 1978. Baxter, a cash basis taxpayer, received a check in the mail for these commissions in early 1979. The check was dated December 30, 1978. Treasury Regulation Section 1.451-2(a) controls and provides, in part, that a taxpayer constructively receives income when it is otherwise made available to draw upon at any time, even though it is not reduced to the taxpayer's possession. However, there is no constructive receipt if "taxpayer's control of its receipt is subject to substantial limitations or …

26 U.S.C. 501(C)(9) Tax Exempt Status Of Voluntary Employees' Benefit Associations, Tony Paxton

Akron Tax Journal

This article discusses Canton Police Benevolent Association v. United States and it's implications related to 26 U.S.C. 501(c)(9).

When Is A Judge Not An Employee? Porter V. Commissioner, Robert Iafelice

Akron Tax Journal

In Porter v. Commissioner,' the United States Tax Court held that Article III judges are not employees, as the term is used in § 219(b)(2)(A)(iv), and therefore they are not qualified participants in plans established for its employees by the United States. The deduction made by the petitioner 2 for an Individual Retirement Account (IRA) was therefore allowed. The deduction was disallowed by the respondent because the respondent determined that the petitioner was an active participant of a plan established for its employees by the United States.

Unitary Theory Of Stock Ownership Fink V. Commissioner, Janis Stamm

Akron Tax Journal

In Commissioner v. Fink,' the Supreme Court held that a dominant shareholder who voluntarily surrenders a portion of his shares to the corporation, while retaining control, does not sustain an immediate loss deductible for income tax purposes. Such a surrender of stock must be treated as a contribution to capital, the basis of the surrendered shares being reallocated to the remaining shares held and loss or gain recognized only when the shareholder disposes of the remaining shares.

Determining Status As An Employee Rev. Ruling 87-41, Sharon L. Simmons

Akron Tax Journal

The Internal Revenue Service recently provided guidance for determining whether a technical service specialist is a common law employee, as opposed to an independent contractor, through Revenue Ruling 87-41. The ruling provides guidance for purposes of the Social Security taxes (FICA contributions), federal unemployment taxes assessed under the Federal Unemployment Tax Act (FUTA), and income tax withholding by employers. Further, the ruling is important as it also provides guidance for employers in determining an individual's status in relation to qualified retirement or health plans.

Cadillacs, Gold Watches, And The Tax Reform Act Of 1986: The Continuing Evolution Of The Tax Treatment Of Gifts To Employees, Mark W. Cochran

Akron Tax Journal

The purpose of this article is to explore the historical background underlying the changes in the Tax Reform Act of 1986, to explain the changes, and to assess their meaning and significance?

A Proposal For Restructuring The Taxation Of Wealth Transfers: Tax Reform Redux?, Edward J. Gac, Sharen K. Brougham

Akron Tax Journal

The Tax Reform Act of 1986 (TRA'86) provided for the most dramatic changes to the Internal Revenue Code since its inception over seventy years ago. The stated purposes of these reforms were to promote "fairness, simplicity, and economic growth." The short-term success of these measures has yet to be ascertained.

It is the position of this article that the long-term prospects for ultimate individual tax reform cannot be divorced from an eventual restructuring of the present federal wealth transfer taxation system, currently consisting of the estate, gift, and generation-skipping taxes. Genuine tax reform will remain unfinished business until such time …

Testimony United States Senate Committee On Finance Subcommittee Penalties March 14, 1988, Nicholas J. Creme, James W. Childs

Akron Tax Journal

This is a transcript of testimony delivered on March 14, 1988 by James Childs to the United States Senate Committee on Finance, Subcommittee on Penalties.

The Repeal Of General Utilities For Corporate Liquidations - The Consequences Of Incomplete And Unexpected Tax Reform, Louis F. Lobenhofer

Akron Tax Journal

This article will first discuss the history of the General Utilities doctrine and its gradual demise. Second, it will summarize the provision, noting both relief provisions and provisions designed to prevent tax avoidance under the new rules. Finally, this article will compare the effects of legislation to the justifications that prompted its enactment and discuss its side-effects.

The New Tax Law: The Future Of Private Enterprise And Entrepreneurship, Alan Greenspan

Akron Tax Journal

This is an excerpt from a speech by Alan Greenspan related to the future of private enterprise and entrepreneurship. Greenspan talks about the 1987 tax law passed by Congress, and this history of tax law in the United States leading up to this point.

Tax Sheltering Of Income: Passive Losses Under The Tax Reform Act Of 1986, Nina J. Crimm, Ryan R. Brenneman

Akron Tax Journal

It is abundantly clear to those in the press and on Capitol Hill that the provisions of the new Tax Reform Act of 19862 will constitute the death knell for tax shelters. The text of the Congressional Record and pages of business, financial journals and newspapers for months prior to the Act's enactment were filled with commentary as to this doomsday effect. However, a prudent reviewer of the actual tax-sheltering provisions of the Act would be far less certain in his estimation of their overall and lasting effect. Even though the so called elimination of tax shelters has been hailed …

A Perspective On Participant Loan Provisions In Qualified Retirement Plans After The 1986 Tax Act, Richard J. Kovach

Akron Tax Journal

The Tax Reform Act of 1986' is the fourth major tax enactment in four years to have a significant impact on qualified deferred compensation plans. Like the Tax Equity and Fiscal Responsibility Act of 1982,2 this most recent tax legislation substantially affects the use of participant loan provisions in qualified plans. The purpose of this article is to analyze the cumulative technical difficulties that retirement plan designers and administrators should now consider in reviewing the feasibility and operation of participant loan provisions.

The Impact Of The Tax Reform Act Of 1986 On Personal Investments, David D. Green

Akron Tax Journal

The Tax Reform Act of 1986 (Act)' represents the culmination of a lengthy process to make the Internal Revenue Code (Code) both simple and fair. Although that goal has been achieved for a vast number of lower-income taxpayers, the resulting Code is anything but simple for investors in real estate and other tax-advantaged investments. The removal of various tax subsidies is causing both investors and tax planners to rethink long-standing investment strategies.

This article focuses on the effect of the changes made by the Act to personal investments, including the loss of the capital gain deduction, the introduction of limitations …

Federal Income Tax Developments: 1986, Merlin G. Briner, James W. Childs

Akron Tax Journal

This article surveys the 1986 federal income tax developments including relevant Supreme Court cases, income, deductions, corporate, partnership and trust taxation, as well as miscellaneous items.

The Tax Reform Act Of 1986: Simplicity, Equity, And Efficiency, Douglas Holtz-Eakin

Akron Tax Journal

The Tax Reform Act of 1986 (TRA86) has added another chapter to the already crowded tax history of the 1980's. Since the election of Ronald Reagan in 1980, the nation has seen several major tax changes: The Economic Recovery Tax Act in 1981, The Tax Equity and Fiscal Responsibility Act in 1982, and TRA86. With tax reform now well down on the list of legislative priorities (at least until next year!) it seems a propitious time for a general assessment of the structure of the federal tax system.

This paper reviews TRA86 with an eye toward these issues. The order …

Federal Income Tax Developments: 1985, Merlin G. Briner, James W. Childs

Akron Tax Journal

This article discusses the federal income tax developments of 1985, including relevant Supreme Court cases, deductions, legislative and treasury regulations, and income recognition and related topics.

Fiduciary Income Taxation And The Holloway Adjustment, Dennis E. Bires

Akron Tax Journal

A great deal of the complexity of the rules dealing with income taxation of trusts and estates' can be attributed to the imperfect compatibility of two different regimes of law: the federal taxation of income and local rules of trust accounting. Just as the confluence of two rivers may generate turbulence exceeding that of either branch, the meeting of federal tax law and state trust law in Subchapter J of the Internal Revenue Code generates problems that neither discipline would present by itself.

In 1972, a New York Surrogate's Court introduced the Holloway adjustment to fiduciary accounting. This equitable adjustment …

Commentary: Does The United States Need An Alternative Tax Base?, James W. Childs

Akron Tax Journal

This article looks at the alternative tax systems of France, Italy, Greece, Switzerland, and Yugoslavia and compares that to the system in the United States. It uses this comparison to discuss whether an alternative tax base is necessary in the United States.

Federal Income Tax Developments: 1983, Merlin G. Briner, Richard J. Kovach

Akron Tax Journal

This article surveys substantive federal income tax developments in 1983, including relevant Supreme Court cases, deductions, legislative and treasury regulations, and income recognition and related topics.

Report On Tax Aspects Of Farmers In Bankruptcy, Ralph T. Turner

Akron Tax Journal

This article will deal only with the individual taxpayer who utilizes the bankruptcy court and not with the tax treatment of corporations and partnerships in bankruptcy. There are special rules for the tax treatment of these entities. This article will review the general principles of tax treatment of an individual whose indebtedness was discharged in bankruptcy under the prior law and under the Bankruptcy Tax Act of 1980. After this general review and comments on their application to farmers, a hypothetical fact situation will be reviewed and the handling of the tax returns for the individual and the bankruptcy estate …

Subchapter S As A Vehicle In Real Estate And Oil & Gas, Lorence L. Bravenec

Akron Tax Journal

This article discusses several significant problem areas faced in real estate and oil & gas activities under the new rules for S corporations enacted by the Subchapter S Revision Act of 1982 (hereinafter the "1982 Act"),' as modified by the Tax Reform Act of 1984 (hereinafter the "1984 Act"). The 1982 Act brought the taxation of S corporations and shareholders more in line with the partnership model, thus making the law conform more to the expectations of the parties. At the same time, the 1982 Act removed many of the serious pitfalls and the sought after planning devices under the …

Proceedings From The 1984 Tax Institute Symposium: Cash Or Deferred Arrangements Under I.R.C. Section 401(K), John H. Appel

Akron Tax Journal

This article examines the reasons why an employer might consider a cash or deferred profit sharing or stock bonus plan. It looks at the rules for a cash or deferred arrangement (CODA) under Section 401(k) of the Internal Revenue Code. It covers the four primary requirements under the I.R.C., and then fifth, and biggest requirement, nondiscrimination.

Proceedings From The 1984 Tax Institute Symposium: Partnerships: Special Allocations Under The New Regulations, The Proposed Regulations Or Whatever, John C. Siegesmund

Akron Tax Journal

This article discusses Section 704 of the Internal Revenue Code and the 1984 proposed regulations related to the section. It looks at the major test of the regulations, that an allocation will be approved if it has substantial economic effect. It examines the two parts of this - that the allocation has to have an economic effect, and that the economic effect has to be substantial.