Taxation-Federal Commons^™

Comments: "Simplification" Is Not Enough: An Analysis Of The Home Office Tax Deduction And The Home Office Simplification Act Of 2009, Lauren Marini

University of Baltimore Law Review

No abstract provided.

Legislating In The Dark: How Congress Regulates Tax-Exempt Organizations In Ignorance, John F. Coverdale

University of Richmond Law Review

No abstract provided.

Schooling Congress: The Current Landscape Of The Tax Treatment Of Higher Education Expenses And A Framework For Reform, Stuart G. Lazar

Journal Articles

Education may be a cornerstone of our society, but the tax treatment of higher education expenses does not appear to have resulted from an intellectual exercise that would make our nation’s educators’ proud. The Internal Revenue Code provides two separate, but equally unsatisfying, routes that allow taxpayers to offset their income with the costs of higher education. Where an individual can reduce her tax liability while receiving an education, the effect is to reduce significantly the cost of that education.

First, where amounts spent on education qualify as an “ordinary and necessary business expense,” a taxpayer will be entitled to …

Critique Of U.S. House Bill 2454 On Climate Change, Michael J. Waggoner

Publications

The U.S. House of Representatives, in June 2009, approved a bill to create a cap and trade system and a system of regulations and subsidies to address the problems of climate change. The U.S. Senate is now considering remedies for climate change. The approach of House Bill 2454 is ill-advised, and should be rejected by the Senate, because of the problems outlined below. I propose that these problems that would not be presented by a carbon tax, a simpler and more effective remedy for the risk of climate change.

Summary And Recommendations (Symposium On Designing A Federal Vat, Part I), Reuven S. Avi-Yonah

Articles

For the past thirty-five years, the debate on fundamental tax reform in the United States has centered on whether some type of consumption tax would replace all or part of the federal income tax. In my opinion, this debate has now been decided. Given recent budgetary developments and the impending eligibility of the baby boom generation for Social Security and Medicare, we cannot dispense with the revenue from the corporate and individual income tax. Moreover, we will need huge amounts of additional revenue, and most informed observers believe that the only plausible source for such revenues is a federal value-added …

When Canons Go To War In Indian Country, Guess Who Wins? Barrett V. United States: Tax Canons And Canons Of Construction In The Federal Taxation Of American Indians, John Lentz

American Indian Law Review

No abstract provided.

One Case To Rule Them All: The Ninth Circuit In Bakersfield Applies Colony To Deny The Irs An Extended Statute Of Limitations In Overstatement Of Basis Cases, Bernard J. Audet Jr.

Villanova Law Review (1956 - )

No abstract provided.

Between Formulary Apportionment And The Oecd Guidelines: A Proposal For Reconciliation, Reuven S. Avi-Yonah

Articles

In the last 30 years, a debate has been raging in international tax circles between advocates of the OECD Transfer Pricing Guidelines and the arm’s length standard (ALS) they embody, on the one hand, and advocates of formulary apportionment (FA) on the other. After the adoption of the 1995 regulations and the new OECD Guidelines, the debate became quieter for a while, because everyone was waiting to see whether the issue had been resolved. However, while there have been few decided cases, it is clear by now that the transfer pricing problem is as bad as it ever was. That …

Gain From The Sale Of An Income Interest In A Trust, Douglas A. Kahn

Articles

A tax doctrine that is related to the anticipatory assignment of income doctrine, but yet different from that doctrine is variously referred to as the "substitute for ordinary income doctrine" or the "anticipation of income doctrine." This latter doctrine arises on the sale of an item. The test often utilized to determine whether that latter doctrine applies is whether the sale of an item substantively represents the receipt of a substitute for future income - i.e., are the proceeds of the sale given "in lieu of" ordinary income that the seller would have otherwise received at a later date. The …

Much Uncertainty About Uncertain Tax Positions, Robert D. Probasco

Faculty Scholarship

The Internal Revenue Service (IRS) announced in January 2010 a new initiative to require certain businesses to report “uncertain tax positions” on a new schedule filed with their annual tax returns. Draft schedules and instructions issued in April 2010 clarified some of the mechanical aspects of the new requirement but left many open issues and questions. The IRS proposal built on requirements by the Financial Accounting Standards Board (FASB) in FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”). The standard requires companies, in their financial statements, to reserve some of the benefits from any position taken …

Reducing Information Gaps To Reduce The Tax Gap: When Is Information Reporting Warranted?, Leandra Lederman

Articles by Maurer Faculty

A core problem for enforcement of tax laws is asymmetric information. The taxpayer knows the facts regarding the relevant transactions it engages in during the year-or at least has ready access to that information. The government is forced to play catch-up, obtaining that information either from the taxpayer or from third parties. Information reporting is routinely used to address this information gap. The government obtains information about the taxpayer's tax situation from a third party and-equally important-the taxpayer knows that the government has received that information. This fosters taxpayer honesty. Information reporting is not a panacea, however. It imposes costs …

Linton Family Llc And The Step Transaction Doctrine, Wendy G. Gerzog

All Faculty Scholarship

This article discusses Linton, a district court decision about a family limited liability company, indirect gifts, and the step transaction doctrine.

The Sixth Amendment And Expert Witnesses In Criminal Tax Cases, Steve R. Johnson

Scholarly Publications

Recently, in the Baxter case, a federal district court vacated the sentence imposed as a result of a guilty plea in a criminal tax case. The court held that the failure of defense counsel to retain the services of an expert in tax crimes sentencing violated the defendant’s Sixth Amendment right to effective representation.

This installment of the Tax Crimes column explores Baxter. Part A briefly notes the civil and criminal tax contexts in which tax experts are used. Part B describes Baxter and its holding. Part C asks whether defense counsel in criminal tax cases should always retain a …

Easterday And The Erosion Of The Financial Inability Defense, Steve R. Johnson

Scholarly Publications

Several tax crimes in the code involve failure to pay known or assessed tax liabilities. For generations, there has been controversy over whether a taxpayer’s lack of funds from which to make payment should preclude conviction for those crimes. The potency of the financial inability defense1 has waned over the years. The recent decision of a divided Ninth Circuit panel in Easterday continues that trend, but the defense should still have life in some situations and some courts.

Part I of this report describes the tax crimes to which a financial inability defense may be relevant. Part II discusses Easterday. …

Misguided Relief: Unsimplifying The Standard Deduction, Alan L. Feld

Faculty Scholarship

The push to use federal money for benevolent purposes occasionally produces more cost than benefit, particularly when the outlay comes in the form of taxes forgiven. The Housing Assistance Tax Act of 2008 added a supplement to the basic standard deduction. A nonitemizing taxpayer may claim a deduction for real property taxes paid, up to $500, $1,000 in the case of a joint return. Initially, the change applied only to 2008, but subsequent legislation extended its life through 2009, and pending legislation would make it a permanent part of the Code. Although well intentioned, the real property tax provision makes …

Families For Tax Purposes: What About The Steps, Wendy G. Gerzog

All Faculty Scholarship

At least 4.4 million families in the U.S. are blended ones that include step-children and step-parents. For tax purposes, these steps receive preferential treatment for their status because they are on the one hand included as family members for many income tax benefit sections, but on the other hand excluded as family members for business entity attribution purposes and for gift and estate tax anti-abuse provisions. In the interests of fairness and uniformity, steps should be treated as family members for all tax purposes where steps have in fact voluntarily acted as their biological or adoptive counterparts, both when such …

Xilinx And The Arm's-Length Standard, Reuven S. Avi-Yonah

Articles

On May 7 the Ninth Circuit decided Xilinx v. Commissioner. By a 2-1 majority, the panel reversed the Tax Court and held that costs of employee stock options must be included in the pool of costs subject to a tax-sharing agreement. The Xilinx decision is important for three reasons. First, cost sharing is probably the key element in current transfer pricing law because it is the principal way in which profits from intangibles get shifted from the United States to low-tax jurisdictions. Moreover, informed observers agree that the allocation of income from intangibles is the most important problem in transfer …

Negron: Circuits Now Split 2-2, Wendy G. Gerzog

All Faculty Scholarship

The article discusses Negron and the circuit split on the issue of whether to value non-assignable lottery payments in a decedent's estate by means of the actuarial tables or whether that value needs to be discounted for non-marketability.

Integrating Subchapters K And S — Just Do It, Walter D. Schwidetzky

All Faculty Scholarship

The Code contains two “pass-through” tax regimes for business entities. One is contained in Subchapter K, which applies to partnerships, the other in Subchapter S, which, unsurprisingly, applies to S corporations. In the main, both Subchapters tax the owners of the entities rather than the entities themselves. Having two pass-through tax regimes creates obvious administrative and other inefficiencies. There was a time when S corporations served a valuable purpose, particularly when taxpayers needed a fairly simple and foolproof pass-through entity that provided a liability shield. But limited liability companies (LLCs), which are usually taxed as partnerships, 1 in most contexts …

Increasing Preparer Responsibility, Visibility And Competence, Leslie Book

Working Paper Series

The insights from the responsive regulation literature present an intriguing model for IRS interaction with preparers, and provide a theoretical context for a more nuanced approach that the IRS could adopt when considering its return preparer strategies. To some extent, the IRS’s current emphasis on preparer education, including the significant resources expended on tax forums and other general outreach programs, reflects IRS awareness that its interaction with preparers must take a varied approach. In this paper, I propose a more personal contact paradigm with preparers, with those contacts facilitated by heightened identification requirements and a more dedicated IRS effort to …

The Work Product Doctrine And Tax Accrual Workpapers, Steve R. Johnson

Scholarly Publications

In its rehearing of Textron, the First Circuit has an opportunity to rectify an error and curb unwise recent expansion of work product protection for tax accrual workpapers. In August 2007, a district court denied the government’s petition for enforcement of an IRS summons on Textron Inc. and its subsidiaries for tax accrual workpapers in connection with IRS examinations of the taxpayers’ 1998 to 2001 income tax returns. A divided panel of the First Circuit affirmed in January 2009. In March 2009, the First Circuit withdrew the panel opinion and dissent, and it set the case for en banc hearing …

Law With A Life Of Its Own: The Development Of The Federal Income Tax Statutes Through World War I, Stephanie H. Mcmahon

Faculty Articles and Other Publications

This manuscript examines the development of the federal income tax within the United States fiscal system from the founding of the nation through World War I. The study reveals that, although the tax had become a permanent feature of the tax system by World War I, congressional debates had focused primarily on whether there should be an income tax as opposed to how it should or would operate in practice. This paper argues that the technical aspects of this tax received surprisingly little congressional attention because when the tax was originally passed it was a marginal revenue measure. Laden with …

Carried Interest: Can They Effectively Be Taxed?, David J. Herzig

Law Faculty Publications

During the April 2008 Democratic Debate, former Senator Obama with former Senator Clinton almost referred to the subject matter of this article verbatim at page three of the transcript. ("We saw an article today which showed that the top 50 hedge fund managers made $29 billion last year-- $29 billion for 50 individuals. And part of what has happened is that those who are able to work the stock market and amass huge fortunes on capital gains are paying a lower tax rate than their secretaries. That's not fair. ") (http://abcnews.go.com/Politics/DemocraticDebate/story?id= 46702 71&page= 1). As stated by both candidates, the …

The Largest Loophole In Federal Tax Law: Preferential Capital Gain Treatment For Private Equity And Hedge Fund Managers' Carried Interests, 42 J. Marshall L. Rev. 529 (2009), Michael R. Pieczonka

UIC Law Review

No abstract provided.

It Down And Count The Cost:" A Framework For Constitutionally Enforcing The 501(C)(3) Campaign Intervention Ban, Benjamin Leff

Scholarly Articles in Law Reviews & Journals

Section 501(c)(3) of the Internal Revenue Code (Code) prohibits charities from intervening in a political campaign for or against a candidate for public office. The Internal Revenue Service (Service) currently interprets the campaign-intervention ban to absolutely prevent charities from communicating their views on candidates, even if such communications are completely financed by non-501 (c) (3) affiliates. This article argues that the current Service enforcement paradigm is unconstitutional because it exceeds the government interest in preventing tax-deductible donations to be used for campaign- intervention. A constitutional interpretation exists under the current statutory framework, but it would require the Service to shift …

Elimination Of The Deduction For Business Entertainment Expenses, Richard L. Schmalbeck, Jay A. Soled

Faculty Scholarship

The proposal is offered as a part of the Shelf Project, a collaboration by tax professionals to develop and perfect proposals to help Congress when it needs to raise revenue. Shelf Project proposals are intended to raise revenue without raising tax rates because the best systems have taxes that are unavoidable to reach the lowest feasible tax rates.

This proposal would deny deductions for all business entertainment expenses. Also, the definition of the term ‘‘entertainment’’ would be narrowed so that expenses that are incurred in a clear business setting and are deeply rooted in producing immediate income or in mining …

Cancellation-Of-Indebtedness Income And Transactional Accounting, Lawrence A. Zelenak

Faculty Scholarship

More than three-quarters of a century after the Supreme Court’s decision in United States v. Kirby Lumber established that the cancellation of a debt produces taxable income, there is still uncertainty - both in the courts and among commentators - concerning the rationale for the taxation of cancellation-of-debt (COD) income. Is the taxation of COD income based on the simple fact that the cancellation of a debt improves the taxpayer’s balance sheet, thus increasing the taxpayer’s net worth in the year of cancellation? Or is it based on a multi-year perspective, in which inclusion of the cancelled debt in income …

Recent Developments In Federal Income Taxation: The Year 2008, Martin J. Mcmahon Jr., Ira B. Shepard, Daniel L. Simmons

UF Law Faculty Publications

This article discusses, and provides context to understand the significance of, the most important judicial decisions and administrative rulings and regulations promulgated by the Internal Revenue Service and Treasury Department during 2008 - and sometimes a little farther back in time if the authors find the item particularly humorous or outrageous. Most Treasury Regulations, however, are so complex that they cannot be discussed in detail and, anyway, only a devout masochist would read them all the way through; just the basic topic and fundamental principles are highlighted. Amendments to the Internal Revenue Code generally are discussed to the extent that …

Tax Penalties And Tax Compliance, Michael Doran

Georgetown Law Faculty Publications and Other Works

This paper examines the relationship between tax penalties and tax compliance. Conventional accounts, drawing from deterrence theory and norms theory, assume that the relationship is purely instrumental--that the function of tax penalties is solely to promote tax compliance. This paper identifies another aspect of the relationship that generally has been overlooked by the existing literature: the function of tax penalties in defining tax compliance. Tax penalties determine the standards of conduct that satisfy a taxpayer's obligations to the government; they distinguish compliant taxpayers from non-compliant taxpayers. This paper argues that tax compliance in a self-assessment system should require the taxpayer …

Risks, Rents And Regressivity Revisited, Reuven S. Avi-Yonah

Articles

This article seeks to survey the debate in the United States about whether the tax base should be income or consumption, and then focus on some recent arguments that have been made in favour of a consumption tax. In the author's opinion, none of these arguments are convincing, and he would favour adopting a consumption tax in addition to, and not in lieu of, the existing income tax.