Taxation-Federal Commons^™

Deducting The Cost Of Smoking Cessation Programs Under Internal Revenue Code Section 213, Michigan Law Review

Michigan Law Review

This Note argues that enrollment fees for a smoking cessation program should be classified as deductible medical expenses. Part I defends this conclusion without questioning the accepted interpretation of section 213(e). Recent medical evidence indicates that the nicotine addiction that cessation program patients seek to break is itself a disease. And even prior to the onset of more serious health consequences, sustained cigarette smoking significantly impairs the functioning of the lungs and heart. Under this analysis, enrollment fees should be deductible as expenses for the treatment of an existing disease or defect, and as "amounts paid . . . for …

The Tax Benefit Rule: Recovery Reevaluated, Paul T. Kestenbaum

University of Miami Law Review

The United States Supreme Court has granted certiorari in two cases, Bliss Dairy, Inc. v. United States and Hillsboro National Bank v. Commissioner, to resolve a conflict in the circuits as to whether recovery is necessary for the application of the tax benefit rule. The author argues that the application of the tax benefit rule should not depend on the existence of a recovery, but instead should depend on whether an event occurs that is inconsistent with the assumptions underlying the prior deduction; recovery merely is a manifestation of an inconsistent event.

Accrual Of Gambling Debts Under Internal Revenue Code Section 451, Michigan Law Review

Michigan Law Review

This Note examines whether an accrual-basis taxpayer must include a legally unenforceable claim in taxable income when it is executed or satisfied. Section I of the Note interprets the "all events test" to require measurement of the likelihood of payment of a debt at the time it is executed: If payment is sufficiently certain, the debt must be accrued. The section concludes that the casinos must include the outstanding markers as income in the year of their execution, and cannot postpone their inclusion until the debts are repaid. Section II argues that accrual-method taxpayers are entitled to use a "bad …

The Decline And Fall Of Taxable Income, Glenn E. Coven

Michigan Law Review

After first exploring the intellectual climate that has facilitated the congressional disregard of taxable income, this Article will examine three areas in which taxable income is no longer the exclusive mechanism for allocating the burden of taxation. That examination will outline the undesirable consequences of the decline of taxable income, and demonstrate that Congress need not have disregarded taxable income to secure the desired pattern of taxation. Because the use of multiple rate schedules constitutes the most significant deviation from the concept of taxable income in terms of the number of taxpayers that it affects and the popular resentment against …

Home Office Deductions: May A Taxpayer Have More Than One Principal Place Of Business?, Michigan Law Review

Michigan Law Review

This Note argues that the Tax Court's more liberal interpretation is correct because it more nearly reflects Congress's intent. Part I seeks a basis for preferring one of the competing interpretations in the text of section 280A and in the section's legislative history, but finds none. Looking, of necessity, to the purposes that Congress sought to advance with section 280A, Part II argues that those purposes do not demand a restrictive reading of "principal place of business." Such a reading, moreover, would undermine fundamental and longstanding congressional tax policies. In the absence of a more explicit statement of congressional intent, …

Tax Breaks For Law Students

Washington and Lee Law Review

No abstract provided.

B Reorganizations: The Voting Stock Rule Revisited

Washington and Lee Law Review

No abstract provided.

Accelerated Depreciation Revisited—A Reply To Professor Blum, Douglas A. Kahn

Articles

Professor Blum's comment addresses the proper or neutral tax treatment to be accorded three of the items discussed in my recent article on accelerated depreciation - namely, annuities, prepaid expenses, and exhaustible assets. Blum disputes my analysis in all three cases. While Blum's article is eminently readable, I do not believe that it refutes my earlier work to any extent. In this reply to Professor Blum, I will deal separately with each of the three items he examines. First, however, it is useful to consider the meaning of the term "tax neutrality" and to set forth my views as to …

Accelerated Depreciation: A Proper Allowance For Measuring Net Income?!!, Walter J. Blum

Michigan Law Review

In a recent article in the Michigan Law Review, Douglas A. Kahn strives to demonstrate that, given the general postulates of the federal income tax, accelerated depreciation is a proper allowance for measuring net income and should not be classed as a tax expenditure. 1 His defense of accelerated depreciation is unusual if not novel, and his presentation is engaging. For anyone who shares my view that most tax expenditure stuff is mainly political rhetoric and who is sympathetic to my position that our tax system is far too harsh in taxing income from capital investments, a new plug for …

Artists, Art Collectors And Income Tax, Alan L. Feld

Faculty Scholarship

The federal income tax law treats artists and art collectors differently. Similar transactions concerning artworks produce disparate income tax results, depending on whether they involve the artist or the collector. On balance, these results seem to favor the collector over the artist. But notwithstanding the dismay of some artists and their advocates, the differences in result flow, in the main, from the differences in the source of the taxpayer's investment in the work.

The collector buys the work with after-tax income. Any gain is properly treated as an investment return and is eligible for capital gain benefits.' The collector, however, …

Accelerated Depreciation—Tax Expenditure Or Proper Allowance For Measuring Net Income?, Douglas A. Kahn

Articles

Since the 1950s, it has become fashionable to attack various provisions of the Internal Revenue Code by calling them "subsidies" rather than "proper" means of measuring taxable income. These "subsidies" through Code provisions have come to be referred to as "tax expenditures," a term coined by Professor Stanley Surrey in a speech he made as Assistant Secretary of the Treasury for Tax Policy on November 15, 1967. In that speech, Professor Surrey stated that our tax system often deliberately departs "from accepted concepts of net income," so that by granting exemptions, deductions, and credits that are not appropriate to an …

The Artist's Tax Dilemma, Wendy J. Gordon

Scholarship Chronologically

An artist's first job is to create. Somewhere down the line, most artists find they have a second job, which is to sell. Many artists resist involvement in the second task (with mixed results), yet beyond it the artist encounters a duty even more dreaded: to pay taxes.

Wright V. Commissioner, 62 T.C. 377 (1974), Aff'd, 543 F.2d 593 (7th Cir. 1976), Ruth L. Gokel

Florida State University Law Review

Income Tax- PROPERTY SETTLEMENT IN DIVORCE- AN UNSETTLED AREA OF SETTLED LAW.

Carter's Projected "Zero-Based" Review Of The Internal Revenue Code: Is Our Tax Code To Be "Born Again"?, L. Hart Wright

Michigan Law Review

The evolution of today's Internal Revenue Code, which began with the mere embryo that Congress created in 1913, has absorbed over the ensuing sixty-four years more creative energy on the part of more co-authors than any other law in history. Despite this unstinted expenditure of "blood, sweat, and tears," the resulting document--were it possessed of human senses--would recognize that, for a foreseeable period, its life will be anything but serene. The plight in which it would find itself could even be compared to that early morning scene observed one hundred years ago by General Custer, when hostile forces were massed …

Federal Taxation Of The Assignment Of Life Insurance, Douglas A. Kahn, Lawrence W. Waggoner

Articles

The most litigated estate tax issue concerning life insurance is whether the proceeds should be included in the insured's gross estate. This question usually is governed by section 2042 of the Internal Revenue Code of 1954, the estate tax provision directed specifically at life insurance. While the Tax Reform Act of 1976 wrought enormous changes in many areas of estate taxation, Congress did not change section 2042. Thus the several unresolved questions concerning the interpretation of that section remain unsettled. But the question of the includability of life insurance proceeds in the gross estate of the insured is not always …

Puttkammer V. Commissioner Of Internal Revenue, Robert English

Maryland Journal of International Law

No abstract provided.

The Judicial Public Policy Doctrine In Tax Litigation, Michigan Law Review

Michigan Law Review

This Note evaluates the merits of Revenue Ruling 74-323. First, it asserts that, while not arbitrary, the Service's resolution of the preemption issue was not mandated by the language of amended section 162 or by the relevant legislative history. Second, it maintains that it is both appropriate and procedurally feasible to apply the judicial public policy doctrine to violations of federal civil rights laws that impose no fine, imprisonment, loss of license, or other criminal penalty. The denial of a deduction in this situation would extend the public policy doctrine beyond both section 162(c)(2) and the judicial doctrine as it …

A Definition Of "Liabilities" In Code Sections 357 And 358(D), Douglas A. Kahn, Dale A. Oesterle

Articles

Internal Revenue Code section 351(a) provides that no gain or loss shall be recognized if property is transferred to a corporation solely in exchange for its stock or securities and the transferors control the corporation immediately after the exchange. If, in addition to receiving stock or securities in an exchange that would otherwise qualify for section 351 treatment, a transferor receives other property or money -- "boot" -- any realized gain is recognized up to the amount of the money and the fair market value of the other property received. The transferee corporation's assumption of the transferor's liabilities or its …

Basic Corporate Taxation, Stefan F. Tucker

Michigan Law Review

A Review of Basic Corporate Taxation, 2d Ed. by Douglas A. Kahn

Alternative Gains Tax Treatments Of Decedents' Appreciated Capital Assets, D. Allen Grumbine

Vanderbilt Law Review

The present treatment of appreciated assets under section 1014' of the Code permits a great deal of accrued appreciation to escape the income tax. While decedents pay a greater estate tax because asset appreciation swells their estates, they pay no gains tax at death on this accrued appreciation. Moreover, the recipients of the decedent's property generally take a stepped-up basis for the property equal to its fair market value at the time of death. A great deal of criticism has been leveled at this system, and numerous proposals have been made for remedying the situation: imposition of a capital gains …

Federal Invome Tax Discrimination Between Married And Single Taxpayers, Michael W. Betz

University of Michigan Journal of Law Reform

This article explores the present tax rate structure and its implications, considers the historical events and policies which created four separate tax rates, analyzes the tax policies embodied by the different rate treatment of married and single taxpayers, and examines the constitutional problems involved in maintaining the present disparate tax treatment. An alternative tax rate treatment, which will avoid the discrimination inherent in the present system, is suggested.

Treatment Of Income Tax Refunds In Bankruptcy After Lines V. Frederick, Michigan Law Review

Michigan Law Review

Under section 70a(5) of the Bankruptcy Act, the bankruptcy trustee is entitled to take the debtor's interest in "property" that "prior to the filing of the petition [the debtor] could by any means have transferred or which might have been levied upon and sold under judicial process against him." The Act does not, however, specifically define the term "property," and, as a result, the Supreme Court has developed its own definition. No problem has been presented by money or assets held by the bankrupt at the time of filing; such items are uniformly considered to be property. Nor has a …

The Employee's Home Office Deduction: The Problem Of Duplicate Facilities, Michigan Law Review

Michigan Law Review

The Internal Revenue Code expressly and impliedly allows taxpayers to deduct many business-related expenses that also fill personal needs. However, the deductibility of home office expenses under the general provision for business expenses, section 162 of the Code, has been a frequent subject of litigation. Section 162 requires that the employee establish that the expenses were "ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business." Since it is well established that working for an employer is carrying on a trade or business within the statute, in order to secure a deduction …

Income Tax "Loopholes" And Political Rhetoric, Boris I. Bittker

Michigan Law Review

When used by newspaper reporters and politicians, the term "tax loophole" is always a pejorative, though the tone of disapproval may be mingled with a dash of admiration for the astute lawyer or accountant who discovered the device. Since condemnation is the predominant tone, it is always assumed that loopholes can be quickly and reliably distinguished from tax provisions that are reasonable and fair. Sometimes, to be sure, it is suggested that the only criterion is self-interest: one man's loophole is another man's relief provision. More frequently, loopholes are said to inure primarily, if not solely, to the benefit of …

Rhoades: Income Taxation Of Foreign Related Transactions, Alan G. Choate

Michigan Law Review

A Book Review of Income Taxation of Foreign Related Transactions by Rufus von Thülen Rhoades

Deferred Compensation Arrangements Under Section 83 Of The Internal Revenue Code: Is Restricted Property Still A Viable Means Of Compensation?, Michigan Law Review

Michigan Law Review

When faced with the problem of compensating key executives, employers have tended to avoid the exclusive use of current cash compensation, since this would result in an immediate and substantial income tax to highly paid employees. Deferred compensation plans have been utilized in order to maximize tax benefits for employees, such as deferred recognition of income and capital gains treatment. Although such plans are structured to meet the needs of the particular employer and employee, several forms of deferred compensation are common. Among these are qualified and unqualified pension, profit-sharing, and stock bonus plans; qualified, restricted, and employee stock purchase …

Deductibility Of Expenses For Child Care And Household Services: New Section 214, Alan L. Feld

Faculty Scholarship

It is increasingly common to find families composed of husband, wife and young children, where both husband and wife are gainfully employed. For some, this pattern is regarded as preferable to the older "ideal" family, where the husband was the sole breadwinner and the wife cared for the children, performed household chores and perhaps engaged in social or charitable activities. Where both spouses are gainfully employed, it is often necessary for the family to employ household help to care for the children and do the housework. These expenditures are "necessary" to the gainful employment of both spouses in the sense …

Federal Income Taxation--Section 165 (C) Loss Allowed For Securities Loaned To Brokerage Firm That Subsequently Became Insolvent And Sold The Securities To Meet The Claims Of Creditors--Stahl V. United States, Michigan Law Review

Michigan Law Review

It is frequently said that there are only two certainties in life: death and taxes. The Court of Appeals for the District of Columbia Circuit recently upheld a district court decision that considerably eased the latter burden for plaintiff-taxpayer in Stahl v. United States. On April 12, 1962, Mrs. Stahl, a widowed musician and music teacher, reached an agreement with Balough & Company (Balough), a Washington securities firm, under which she was to surrender to it control of securities with a market value of approximately $210,000. Balough used the securities to meet the minimum capital requirements for brokerage firms established …

Kahn: Basic Corporate Taxation, John C. Chommie

Michigan Law Review

A Review of Basic Corporate Taxation by Douglas A. Kahn

Civil Rights--Segregation--Federal Income Tax: Exemptions And Deductions--The Validity Of Tax Benefits To Private Segregated Schools, Michigan Law Review

Michigan Law Review

In granting the preliminary injunction, the district court found that plaintiffs were asserting a substantial constitutional claim and had a reasonable possibility of success. Balancing the equities of the parties, the court decided that the possibility of significant adverse effect on the Commissioner and schools awaiting tax benefits was not great and was in any event far outweighed by the harm which could result from a denial of the requested relief pendente lite. Thus, the court found that the threat of irreparable injury justified the issuance of a preliminary injunction. The propriety of the court's decision to grant a preliminary …