Tax Law Commons^™

The Innocent Spouse Rules, Richard C.E. Beck

Other Publications

No abstract provided.

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 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.

The Innocent Spouse Problem: Joint And Several Liability For Income Taxes Should Be Repealed., Richard C.E. Beck

Articles & Chapters

Husbands and wives who elect to file joint federal income tax returns

are jointly and severally liable for the entire tax due. Ninety-nine

percent of married couples who file income tax returns make the election

to file jointly, and each spouse thereby incurs personal liability for

the other spouse's income taxes. This Article argues that the rule is

unfair and unjustified and should be repealed

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 …

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 …

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.

The Deductibility Of A Worthless Right To Contribution For Joint Income Taxes: The Mistaken Line Of Cases Under Rude V. Commissioner, Richard C.E. Beck

Articles & Chapters

No abstract provided.

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.

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.