Tax Law Commons^™

Professor T.S. Adams (1873-1933) On Federal Taxation: Deja Vu All Over Again, Thomas Earl Geu

Akron Tax Journal

Professor Thomas Sewell ("T.S.") Adams was instnmental in the development of the income tax and one of income tax's greatest proponents. As a result of his efforts, he left much of the income tax as his legacy. Born on December 29, 1873, he was a Professor of Political Economy at Wisconsin. Washington University in St. Louis, Comell, and Yale.

Beyond being a scholar, however, he was pragmatist and was very aware of the practical significance of an efficient and effective tax system. He recognized that the true laboratory of tax theory was the nation's economy, and he actively engaged in …

Tax Treatment Of Takeover Costs: Supreme Court Responds To Controversy!, Ray A. Knight, Lee G. Knight

Akron Tax Journal

This article reviews the position of the IRS along with the reasoning of the courts - including the Supreme Court's 1992 Indopco, Inc. v. Commissioner decision - concerning the tax treatment of costs incurred in a takeover.

Software Taxation In Ohio, Robert W. Mcgee

Akron Tax Journal

For more than a decade after the first software tax case was decided, computer software was uniformly classified as intangible for the purpose of sales, use, and personal property taxes, and therefore exempt from taxation. Then, in 1983, the decisions began to go in the other direction, classifying software as tangible and therefore subject to taxation. Ohio courts have played an early and continuing role in the debate over software taxation. This article provides a brief overview of software taxation in general, summarizes the role Ohio courts have played, and compares and contrasts the Ohio position on software taxation with …

Tax Data Disclosure Under The Freedom Of Information Act: Evolution, Issues And Analysis, Mark A. Segal

Akron Tax Journal

In this article an examination and analysis is made of the major provisions of the FOIA, of how the FOIA has been applied in the tax area, and of major emerging issues concerning the FOIA. Particular attention is accorded to the common clash of the FOIA's policy of disclosure with I.R.C. § 6103's general rule of confidentiality and nondisclosure of tax return data.

The Service's Latest Attempt To Regulate Hospital-Physician Relationships: A Critical Analysis, Patrick H. Lucas

Akron Tax Journal

The Chief Counsel of the exempt organization division of the Internal Revenue Service concluded in the General Counsel Memorandum that each of these rulings should be revoked for three reasons: (1) The transactions violated the proscription against inurement of an exempt organization's earnings to any private individual; (2) the transactions infringed upon the doctrine that an organization must operate for public rather than private benefit in order to be exempt from the income tax; and (3) the transactions may violate federal law and that such violations are inconsistent with exemption from the income tax. Each of these theories is examined …

The Entertainment Facility Rules Of Section 274 And Corporate-Owned Condominiums, Mary E. Vandenack

Akron Tax Journal

In the past decade Congress has focused a lot of attention on limiting or eliminating deductions for lavish entertainment. An area where deductions have been virtually eliminated is that of "entertainment facilities." This Article examines the disallowance provisions of I.R.C. § 274 concerning entertainment facilities in the context of corporate-owned entertainment facilities.

United States Federal Tax Policy Surrounding The Investment Tax Credit: A Review Of Legislative Intent And Empirical Research Findings Over Thirty Years (1962-1991), Robert E. Rosacker, Richard W. Metcalf

Akron Tax Journal

Congress enacts tax legislation amidst numerous concerns beyond mere revenue raising. Significant congressional tax policy consideration is conferred upon social objectives, equity concerns, administrative matters, and macroeconomic goals. Within the purview of macro-economic goals can be found federal tax policy relating to investments in fixed assets - which assets are depreciable, the allowable depreciation methods, depreciable lives, and the investment tax credit. Federal tax policy concerning the investment tax credit (ITC) is the topic of this article.

The Unrelated Business Income Tax And Its Effects Upon Collegiate Athletics, Frank James Vari

Akron Tax Journal

This article examines the Unrelated Business Income Tax and its application to corporate sponsorship of college football bowl games and other exempt organizations likely to be affected by Technical Advice Memorandum 91-47-007. Thereafter, the article will consider the IRS's proposed examination guidelines of corporate sponsorship income, the public policy concerns regarding such income, and the proposed legislation introduced to address the competing concerns.

Establishing Reasonableness Of Compensation Difficult In Irs Attackes, Michael P. Watters, Daryl Burckel

Akron Tax Journal

With this in mind, reasonable compensation determinations have developed a different twist for shareholder-employees of Subchapter S corporations. As the payroll tax burden continues to increase, it now appears that the respective positions of the taxpayer and the IRS in issues of reasonable compensation, at least in the case of S corporations, are being reversed. Thus the issue has turned to how small, rather than how large, a shareholder-employee's salary may be and still be considered reasonable.

The topic at hand centers around minimizing the payroll tax burden of the shareholder-employee. In recent years, payroll taxes have increased substantially in …

Form 990: Useful In Analyzing Not-For-Profit Ministries?, Il-Woon Kim, Charles K. Moore, Richard W. Metcalf

Akron Tax Journal

The major purpose of this article is to analyze the Forms 990 filed with the IRS by some religious organizations including television evangelists. Specifically, this article (1) examines the financial operations of religious organizations, such as revenue generation, spending, investment and borrowing; (2) investigates their accounting practices and conformance to generally accepted accounting principles; and (3) discusses the usefulness of Form 990 in monitoring tax-exempt religious organizations. The results of this study will provide evidence on whether the Form 990 filed by religious organizations conforms to generally accepted accounting principles and fairly represents their financial operations. The results will also …

Substance Over Form: The Conerstone Of Our Tax System Or A Lethal Weapon In The Irs's Arsenal?, Ray A. Knight, Lee G. Knight

Akron Tax Journal

This article reviews the IRS and court usage of the substance over form doctrine to determine its role in the federal tax system. The specific issue addressed is whether the doctrine is the cornerstone of the federal tax system or merely another lethal weapon in the IRS's arsenal. To accomplish this objective, the article focuses on the doctrine's development in Supreme Court cases, and describes the primary ancillary tax principles applied to create and shape the doctrine: arm's-length versus self-dealing, business purpose versus tax avoidance, and step versus independent transaction treatment of a series of interrelated transactions. The issue of …

An Indepth Analysis Of The New Money Laundering Statutes, Peter J. Kacarab

Akron Tax Journal

This article will analyze in depth the elements, application, and limitation of these statutes. It is the author's intent that the reader, after digesting the following pages, will come away with an understanding of the statutes and have an appreciation that these laws, although not a panacea, can be a powerful new tool for the Federal government in its war against crime.

The Simplified Employee Pension: An Increasingly Attractive Alternative Among Qualified Retirement Plans, Richard J. Kovach

Akron Tax Journal

Even if the SEP rules remain unaltered for the next several years, employers will want to continue questioning whether their retirement contribution objectives are best served by conventional plans that are increasingly more difficult to administer and keep tax-qualified.9 In effect, the SEP may become more attractive by default, as I.R.C. § 401(a) plans continue to become less attractive as a result of the overly complex legislative and regulatory tinkering to which they are subject. Practitioners should reconsider this point when reviewing each new change or interpretation of law affecting standard qualified retirement plans.

The discussion that follows is organized …

Bankruptcy Officials Vs. The Internal Revenue Service: A Federal House Divided Against Itself, Craig J. Langstraat, Mark S. Aquadro

Akron Tax Journal

This article will discuss several current areas of dispute between bankruptcy officials; i.e., trustees and judges, and the Internal Revenue Service ("IRS") as evidenced by litigation in the U.S. Supreme Court and certain federal circuit courts of appeal. A policy resolution to the numerous conflicts will be suggested along with specific statutory modifications to alleviate the costly burden of continued future litigation.

The University Of Akron Center For Taxation Studies Report: Complexity And Compliance Consequences Of The 1986 Reform Act

Akron Tax Journal

The study's goal was to determine whether tax experts (a tax expert was defined by association with professional tax organizations and years of experience in the field) believe that the Reform Act has resulted in a Federal tax policy which is substantially more complex than pre-1986 regulations. Individuals interviewed are experts in the practice of providing tax information and tax advice. They were selected from the members of the Tax Sections of the American Bar Association (ABA) and the American Institute of Certified Public Accountants (AICPA). The study sought expert opinions on the impact of the 1986 Act on tax …

The Interpretation Of Taxing Statutes: The English Perspective, Nicola Preston

Akron Tax Journal

Revenue law is entirely a creature of statute. The maxim that there is "no equity in tax" is embodied in the Bill of Rights 1689 which provided for "no taxation without legislation." This principle was of major political importance in 1689 because prior to the English Civil War 1642-49, Charles I had attempted to raise funds without the aid of Parliament, by inter alia, levying a window tax' and imposing the payment of ship money nationwide. The authors of the Bill of Rights were keen to ensure that the monarch would be unable to exercise such absolute power in the …

The Taxation Of The Unrelated Business Activities Of Exempt Organizations: Where Do We Stand? Where Do We Seem To Be Headed?, Donald C. Haley

Akron Tax Journal

This article reviews the background of the UBIT, analyzes and evaluates recent court decisions interpreting the hotly debated criteria for its imposition, reviews the status and potential implications of current Congressional consideration of revisions to the UBIT, and concludes with an evaluation of the prevailing authority and the criteria for its application.

Some Planning Considerations In Light Of The Second Set Of Pal Regulations, Hans-Dieter Sprohge

Akron Tax Journal

This article consists of three parts: (1) an overview of the definition of an activity, (2) planning considerations, and (3) a summary of amendments to the first set of PAL Regulations. First, the overview section explains that a separate activity is an undertaking that consists of income-producing operations at a single location that are either predominantly rental operations or predominantly trade or business operations. Second, the overview discusses the aggregation and fragmentation rules for rental activities and trade or business activities. The Regulations provide detailed rules only for aggregating separate rental real estate activities into a single activity or for …

Deductibility Of Mandatory Donations To Religious Organizations Under The Internal Revenue Code, Sandra Machan

Akron Tax Journal

Church of Scientology members discovered their "inner selves" through "auditing" I and studied Church doctrines and tenets during "training" sessions. To participate in the auditing and training sessions, members paid mandatory or fixed fees to the Church.

In a recent United States Supreme Court Case, the Court considered whether the mandatory donations made to the Church of Scientology constituted a charitable deduction. The Court determined that the members made the mandatory donations with the expectation of a commensurate return benefit (i.e., a quid pro quo). and disallowed the charitable contribution deductions.

Although the Court's decision to disallow the deductions affected …

Towards An Understanding Of The Principles And Application Of The Temporary Regulations Under Internal Revenue Code Section 752, Madeline Mcguckin

Akron Tax Journal

This paper explores the methodology by which the Service has implemented the Congressional directive to allocate basis under I.R.C. §752 in accordance with economic realities. I.R.C. §752 contains rules for adjustment to a partner's basis in her partnership interest to reflect her share of the partnership's liabilities. The temporary regulations contain an elaborate set of rules for determining whether any partner bears the economic risk of loss with respect to a partnership liability, and for allocation of partnership liabilities among the partners in a manner consistent with the economic risk of loss analysis.

Should Internal Revenue Code Section 277 Be Applied To Cooperative Housing Organizations?, Nina J. Crimm

Akron Tax Journal

Whether IRC section 277 should be applied to cooperative housing corporations is the subject addressed by this article. First, the article explores the terms of the statute and Congress' intent in adopting it. In doing so, the article assesses the functions of cooperative housing organizations and the connections that such organizations and section 277 have with other federal tax provisions. Finally, the article considers whether the application of IRC section 277 to cooperative housing corporations is fair.

Transfer Or Redemption For A Withdrawing Partner: An Indifference Econometric Decision Model Built On The Position Improvement Equilibrium ("Pie") Concept, Jayprakash G. Patankar, Charles K. Moore, James W. Childs

Akron Tax Journal

The preferred way for a withdrawing partner to leave a partnership is normally thought to be by way of redemption under Internal Revenue Code Section 736 rather than as a transfer under Section 741 The advantage to the continuing partnership lies in the deductability of the payment to the withdrawing partner for goodwill. The withdrawing partner benefits from a higher exchange price, increased by the tax benefits of redemption treatment. However, the following three factors tilt the preference back toward a 741 transfer for both parties: individual obligation of portions of the exchange price, with additional basis, goodwill negotiations and …

The Ill Effects Of Mid - 1980s Tax Policy On Higher Education, J. Timothy Phillips, Robert A. Bullivant

Akron Tax Journal

This article will focus on the provisions of the 1984 and 1986 Acts that most directly affect higher education in an adverse way. While tax legislation in the early 1980s left higher education relatively unscathed, these two acts of the mid- 1980s had major detrimental effects on higher education.

This article will catalog and assess the impact on higher education of several tax law provisions enacted in the mid-1980s. It is the thesis of this article that the individual pieces of legislation are a de facto (and probably unwitting) educational policy that adversely affects higher education. This article will not …

Family Attribution, Alan Sunukjian

Akron Tax Journal

The concept of attribution (constructive ownership) is one of the most difficult concepts to understand and correctly apply in tax law today. Attribution is the imposition of stock ownership upon an individual or entity from another individual or entity for taxation purposes. This concept is further complicated when the already attributed stock is reattributed to a third individual or entity.

Attribution is premised upon control. It is similar to the incidents of ownership doctrine found throughout the estate and gift tax code. Under this doctrine an insured party is presumed to have control over an insurance policy when he or …

Attacking The Tax Gap, Tom Weiksnar, Todd Van Valkenburg

Akron Tax Journal

Today a radio station played something extraordinary, an Internal Revenue Service (IRS) advertisement promoting taxes. "Help someone with their taxes, there is no telling what the returns may be." At last, after five years of American Bar Association (ABA) research, the Tax Reform Act of 1986 (TRA'86), and countless private studies, the IRS seems to be taking an affirmative step in dealing with tax noncompliance. Moreover, the IRS realizes the answer lies in the attitudes of the taxpayers, as well as in the collection system itself. This news is truly exciting.

Specific arenas of taxation like gift and estate tax, …

Some Legislative Implications Of The History Of The Judicial Interpretation Of Section 1221, Hans-Dieter Sprohge

Akron Tax Journal

This article consists of six sections. The first section briefly indicates the economic significance of the correct classification of property as either a capital or an excluded asset. In the second section, the definition of a capital asset and the list of properties specifically excluded from the definition are presented and analyzed. The analysis demonstrates how the present formulations of the definition of an excluded asset can be given a broad and a narrow interpretation. The third section discusses how the Corn Products decision was conventionally construed to be based on a broad interpretation of the definition of an excluded …

Bankruptcy As An Alternative To The Statute Of Limitations For Relief From Overdue Income Taxes, Harold E. Wolfe Jr.

Akron Tax Journal

This article analyzes the situations in which a bankruptcy filing could be used as an alternative to the expiration of the statute of limitations on collections and sets forth various considerations that should be reviewed by the practitioner prior to a bankruptcy filing. Practitioners are cautioned that there are many collateral consequences resulting from a taxpayer's bankruptcy petition filing and each case must be analyzed carefully in light of the interplay of the Bankruptcy Code, the Internal Revenue Code and the sparse case law available in this area.

"Substantial Justification" Further Defined By Phillips, Jerome S. Horvitz, Annette Hebble

Akron Tax Journal

The Tax Court in Phillips (referred to as Phillips II) has set helpful guidelines for making a determination of when the IRS has taken a position which is not substantially justified. This is one of the tests that must be satisfied before a court of proper jurisdiction can grant a motion for litigation costs pursuant to Section 7430. Phillips I also addresses the issue of settlement attempts, and whether they are needed to exhaust administrative remedies, which is a further requirement for Section 7430 treatment. The following discussion describes the legislative purpose of Section 7430 and its effectiveness in …

Car Depreciation, Georgia Maistros

Akron Tax Journal

Every businessperson is concerned about his or her taxable deductions. Depreciation is one of those deductions. Depreciation is the reasonable allowance deducted every year for the exhaustion and wear and tear as property becomes obsolete.' In 1988, there are many depreciation methods in use. A businessperson must be familiar with all of these methods in order to be able to be in full compliance with the tax law. The average businessperson is in awe of the tax code and will more than likely call up on a qualified tax professional to do his or her taxes. The accountant, CPA, or …

Complexity And Compliance Issues In The U.S. Tax System, Marie Rady

Akron Tax Journal

This article is a compilation of views about the current tax system. In addition, this article seeks to identify what we are or should be doing about the complexity and compliance problems inherent in our tax system, and offers approaches from various groups posed to alleviate some of the complexity and compliance problems.