Tax Law Commons^™

The Post-Tarp Movement To Regulate Banker Pay, Eric D. Chason

Faculty Publications

No abstract provided.

Recovery Of Interest On A Tax Underpayment Caused By A Tax Advisor 'S Negligence, Jacob L. Todres

Faculty Publications

(Excerpt)

When a tax advisor renders incorrect advice due to negligence and a plaintiff establishes all the requisite elements of a malpractice cause of action, the most frequently encountered direct damages consist of four elements: additional taxes caused by the negligence, interest on underpaid taxes, penalties, and corrective costs incurred in attempting to eliminate or mitigate all or some of the foregoing damages. This article will focus on the recoverability of interest incurred by a plaintiff on a tax underpayment caused by the tax advisor's negligence. Such interest payment is present in many, if not most, tax malpractice situations because …

The History Of Intellectual Property Taxation: Promoting Innovation And Other Intellectual Property Goals?, Xuan-Thao Nguyen, Jeffrey A. Maine

Faculty Publications

An important issue deserving scholarly attention concerns the proper role of the federal tax system in achieving intellectual property law's innovation objectives. The article traces the historic development of the specific tax rules governing intellectual property, identifies present areas of policy dissonance in the intersection of intellectual property and taxation, and calls for an appropriate legal framework for future intellectual property tax legislation.

Equity And Efficiency In Intellectual Property Taxation, Xuan-Thao Nguyen, Jeffrey A. Maine

Faculty Publications

This article evaluates the Current US income tax regime governing intellectual property by focusing on the traditional principles of tax policy - tax fairness and efficiency. It highlights the shortcomings of the current tax system in fulfilling both of these tenets.

Construing Wills And Trusts During The Estate Tax Hiatus In 2010, S. Alan Medlin, F. Ladson Boyle

Faculty Publications

Many estate planners have drafted wills and revocable trusts with dispositive provisions based on formulas. These formulas often use language based on transfer tax terminology. For clients who die in 2010, the language used in these formulas will be ambiguous, if not apparently meaningless, because Congress failed to re-institute the estate tax for 2010. The resulting 2010 estate tax hiatus will result in will and revocable trust construction problems for the estates of many decedents who die during the hiatus. Courts will have to use statutory and common law construction methods to attempt to determine the decedent's dispositive intentions. This …

Financial Options In The Real World: An Economic And Tax Analysis, David M. Hasen

Faculty Publications

Many of the consequences of issuing and purchasing options on publicly traded property have been well understood since Black and Scholes developed a model for option pricing. No model of options, however, provides an accurate economic analysis of the actual transactions that issuers and purchasers engage in when options are bought and sold. One consequenceof this gap in understanding is that the rules for taxing options remain poorly developed. This Article provides a transactional analysis of option sales for the first time. The focus is on covered options, but the analysis also has implications for options in which the underlying …

Taxing Structured Settlements, Brant J. Hellwig, Gregg D. Polsky

Faculty Publications

Congress has granted a tax subsidy to physically injured tort plaintiffs who enter into structured settlements. The subsidy allows these plaintiffs to exempt the investment yield imbedded within the structured settlement from federal income taxation. The apparent purpose of the subsidy is to encourage physically injured plaintiffs to invest, rather than presently consume, their litigation recoveries. Although the statutory subsidy by its terms is available only to physically injured tort plaintiffs, a growing structured settlement industry now contends that the same tax benefit of yield exemption is available to plaintiffs' lawyers and nonphysically injured tort plaintiffs under general, common-law tax …

Codification Of The Economic Substance Doctrine, Erik M. Jensen

Faculty Publications

In March 21, Congress codified a version of the economic substance doctrine, together with a stringent strict-liability penalty that applies if noncompliance with the doctrine leads to an underpayment of tax. This article provides guidance to investors and their advisors about the significance of the doctrine, discussing, among other things, the effects of codification, interpretive issues arising from the statutory language, and the lack of guidance about the transactions to which the doctrine applies. The article concludes that codification is something that everyone must pay attention to, but that many of the concerns raised by commentators about its scope have …

Integrating Iras With Snts, Thomas Simmons

Faculty Publications

What happens when a client's IRA (or qualified retirement plan) names a third party supplemental needs trust (SNT) as a beneficiary? From a tax perspective, the result might not be pretty. The difficulty in integrating an SNT with an IRA lies in the "see through trust" rules which must be observed in order to qualify for beneficial income tax treatment.

Using Salience And Influence To Narrow The Tax Gap, Susan Morse

Faculty Publications

This Article contains five parts. Part I describes the details and limitations of several existing tax-gap-closing approaches relevant to self-employed and small business taxpayers: third-party reporting, audit, whistleblower rewards, and gatekeeper strategies. Part II outlines the concepts of salience and influence and places them in the context of proposals to address or close the tax gap. Part III considers how salience and the influence principle of social proof could improve government messages to taxpayers about taxpaying obligations and audit risks, and to tax preparers about diligence requirements. Part IV outlines strategies based on the influence principles of reciprocity and commitment …

Doma And The Internal Revenue Code, Patricia A. Cain

Faculty Publications

The purpose of this article is to make the argument that I think needs to be made: DOMA, as applied to the Internal Revenue Code as a whole, is unconstitutional because it lacks a rational basis.

Let me explain, up front, that my constitutional argument about § 3 has nothing to do with whether Congress has the power to enact such legislation. Congress, after all, does have the power to levy taxes and control our borders. Thus, Congress should have the power to determine which married couples can file a joint return and which non-citizen spouses can be given preferential …

Cash Businesses And Tax Evasion, Susan Morse, Stewart Karlinsky, Joseph Bankman

Faculty Publications

This Article attempts to provide a qualitative picture of tax evasion in the small business sector. It provides details from almost 275 field study interviews with cash business owners and with tax preparers and bankers who serve cash business clients. Our research suggests answers to the questions of who evades taxes, what taxes they evade, and why and how they evade taxes. This Article proceeds in three additional parts. Part II summarizes the main threads of relevant social science research on small business tax compliance. Part III describes the methodology and results of this interview study. Part IV concludes.

Acquiring Innovation, Xuan-Thao Nguyen, Jeffrey A. Maine

Faculty Publications

This article explores whether exceptions from Asset-capitalization and rational tax depreciation rates are justified to reflect the realities of today's segmentation of the innovation market. The authors argue that the federal tax subsidy for innovation should not be limited to initial research, but should be expanded to cover desirable acquisitions in order to achieve optimal innovation outcomes and enhanced economic growth.

God, Gaia, The Taxpayer And The Lorax: Standing, Justiciability, And Separation Of Powers After Massachusetts And Hein, Jonathan H. Adler

Faculty Publications

The Supreme Court decided two important standing cases during the October 2006 term: Hein v. Freedom from Religion Foundation and Massachusetts v. EPA. The latter is important for what it did, the former for what it did not do. Whereas Hein hewed closely - perhaps too closely - to prior standing precendents, the Massachusetts decision substantially departed from existing precedent and established a new doctrine of special solicitude to state standing. Both decisions involved generalized grievances about federal government policies that affect citizens as a whole, but point in opposite directions. In many respects the opinions are in significant tension …

Tax Malpractice Damages: A Comprehensive Review Of The Elements And The Issues, Jacob L. Todres

Faculty Publications

(Excerpt)

This Article explores the proper measure of damages in tax malpractice litigation. Assuming a plaintiff establishes negligence by a tax advisor and the other requisite elements of the cause of action, exactly what damages may be recovered? May the plaintiff recover additional taxes owed? What about recovery of interest, penalties, and lawyer's or accountant's fees? What about recovery of consequential damages, such as those for emotional distress or mental anguish? What if, as a result of the tax advisor's negligence, the plaintiff is audited and other, unrelated deficiencies are uncovered that likely never would have come to light but …

Quantifying The Tax Advantage Of Deferred Compensation, Eric D. Chason

Faculty Publications

No abstract provided.

Naked And Covered In Monte Carlo: A Reappraisal Of Option Taxation, Eric D. Chason

Faculty Publications

The market for equity options and related derivatives is staggering, covering trillions of dollars worth of assets. As a result, the taxation of these instruments is inherently important. Moreover, the importance is made even more acute by the use of options in creating more complex transactions and in avoiding taxes. Consider an equity call option, which entitles, but does not obligate, its holder to buy stock at a set price at a set time in the future. Option theory gives us a way to break the option down into more fundamental units. For example, an equity call option over 10,000 …

Introduction: Capitalizing On The Success Of Entrepreneurship: Ipos, Private Sales, Tax Aspects, Residual Interest Of Entrepreneurs After Sales Of Ipos, Richard K. Gordon

Faculty Publications

Panel discussion on "Capitalizing on the Success of Entrepreneurship: IPOS, Private Sales, Tax Aspects, Residual Interest of Entrepreneurs after Sales of IPOS" from the "The Canada-United States Law Institute Conference on Comparative Legal Aspects of Entrepreneurship in Canada and the United States" - Cleveland, Ohio April 13-14, 2007.

Outlawing Pension-Funding Shortfalls, Eric D. Chason

Faculty Publications

Before ERISA, employees faced a large risk that their employers would default or renege on pension obligations. By creating a federal guarantor of pensions (the PBGC), ERISA has greatly reduced this risk. All else being equal, low-risk pensions are worth more to employees but cost more to provide. Congress has never had a coherent policy on who should pay for these extra costs. Moreover, legal scholars have failed to create a theoretical framework for dealing with these costs, focusing instead on the supposed "moral hazard" that the PBGC guaranty creates. This Article inserts itself into the scholarly vacuum, asserting that …

Why Pension Funding Matters, Eric D. Chason

Faculty Publications

No abstract provided.

Bankruptcy Reform: What's Tax Got To Do With It?, Michelle A. Cecil

Faculty Publications

The article takes a two-pronged approach to the issue. First, it argues that all post-petition appreciation should be taxed to the debtor rather than to the debtor's bankruptcy estate because the debtor enjoys the benefits of the asset's appreciation in value and because, from a tax perspective, the results will be identical irrespective of whether the debtor or the bankruptcy estate is taxed on the asset's post-petition appreciation. Second, the article proposes that the gain accruing before the termination of the bankruptcy proceeding be treated as discharge of indebtedness income so that the debtor can defer recognition of the gain …

Giving Intellectual Property, Xuan-Thao Nguyen, Jeffrey A. Maine

Faculty Publications

The interdisciplinarity of intellectual property and taxation poses many challenges to the disparate existing norms in each field of law. This Article identifies and critiques the current tax regime governing the giving of intellectual property as a manifestation of the failure to understand the principles and policies underlying intellectual property and the firm. It proposes an incentives-based system that would encourage firms to extricate part of their repository of residual rights by surrendering their monopolistic ownership of intellectual property for the benefit of charitable organizations and, in turn, the development and growth of society.

Wheir’S The Beef?: Buffalo Law And Taxation, Erik M. Jensen

Faculty Publications

The intersection of buffalo law and taxation hasn't been a busy one, but accidents still happen: not everyone understands that buffalo have the right of way. This article critically analyzes the recent Tax Court summary opinion in Wheir v. Commissioner, which involved a bodybuilder who sought to deduct the cost of an incredible amount of buffalo meat. Along the way, the article brings buffalo law learning up-to-date; revisits some classic, nineteenth-century buffalo law cases; and, most important, considers whether there are important differences between the American bison and American beef cattle - differences that might have relevance to American tax …

Interpreting The Sixteenth Amendment (By Way Of The Direct-Tax Clauses), Erik M. Jensen

Faculty Publications

The Sixteenth Amendment and the direct-tax clauses have become subjects of interest in the legal academy and, as proposals for new forms of national taxation emerge on a seemingly daily basis, they could become subjects of more general interest as well. Under the direct-tax clauses, a direct tax must be apportioned among the states on the basis of population, making such a tax difficult, although not impossible, to implement. Following the Supreme Court decisions in the 1895 Income Tax Cases, which held that an 1894 income tax was a direct tax that had not been properly apportioned, the Sixteenth Amendment, …

Taxation Of Beards, Erik M. Jensen

Faculty Publications

This article makes a compelling case that the United States could learn from the imaginative tax policy-maker Peter the Great and institute a tax on beards. Such a tax could raise a little revenue, decrease scruffiness, and provide a new subject for cutting-edge law review notes.

Note: This a description of the paper and not the actual abstract.

The Taxing Power, The Sixteenth Amendment, And The Meaning Of ‘Incomes,’, Erik M. Jensen

Faculty Publications

This article examines the debates leading to the enactment of the 1894 income tax, which the Supreme Court struck down in 1895, and the Sixteenth Amendment, ratified in 1913, and concludes that an income tax and a tax on consumption were understood to be fundamentally different types of taxes. The author argues that the term “taxes on incomes” in the Sixteenth Amendment should be interpreted with that distinction in mind. The Amendment was intended to make a “tax on incomes,” and only a tax on incomes, possible without the apportionment that would otherwise be required for a direct tax. For …

Unapportioned Direct-Consumption Taxes And The Sixteenth Amendment, Erik M. Jensen

Faculty Publications

The point of this essay is simple: a direct-consumption tax like the Forbes-Armey-Hall-Rabushka flat tax or the Nunn-Domenici USA tax is not a "tax on incomes" within the meaning of the Sixteenth Amendment. As a result, such a tax would be constitutional only if it were apportioned among the states on the basis of population. And since these taxes would not be apportioned-how could they be and work as they are intended to work?-they would be unconstitutional.

Taxation And The Constitution: How To Read The Direct-Tax Clauses, Erik M. Jensen

Faculty Publications

This essay responds to Professor Bruce Ackerman, who had challenged the author's understanding of the Direct-Tax Clauses of the Constitution and the Sixteenth Amendment to that Constitution.

Respect For Statutory Text Versus ‘Blithe Unconcern’: A Reply To Professor Coverdale, Erik M. Jensen

Faculty Publications

In Tufts v. Commissioner, the Supreme Court in 1983 had concluded that relief from a nonrecourse liability on disposition of property should be reflected in the seller's amount realized, even if the value of the property had dropped below the principal amount of the obligation. Professor Coverdale quite reasonably complained that the statutory definition of amount realized makes no mention of liabilities and that, not quite so reasonably, commentators had shown blithe unconcern about statutory language. A great fan of adhering to statutory language, the author nevertheless argues that interpreters must take into account judicial developments, in this case beginning …

The Control Of Avoidance: The United States Alternative, John Tiley, Erik M. Jensen

Faculty Publications

This article, jointly written by a British and an American academic, describes the American experience in identifying and attacking tax avoidance. The article was part of a symposium issue of the British Tax Review, published by Sweet and Maxwell, devoted to tax avoidance issues around the globe.