Tax Law Commons^™

Irs's Recent Uncertain Tax Positions Initiative: A Tangle Of Accounting, Tax And Privilege Issues, 9 Depaul Bus. & Comm. L.J. 401 (2011), Kathryn J. Kennedy

UIC Law Open Access Faculty Scholarship

Given the extremely limited source of resources available to the IRS in recent years, it's not surprising that it is exploring all sorts of avenues to increase its efficiency, particularly relying on corporate taxpayers to self report questionable tax positions. Under the banner of "corporate governance" and "transparency," the Service issued a series of proposals in 2010 requiring disclosure of uncertain tax positions ("UTPs") by corporate taxpayers. The Service essentially piggybacked on the recently imposed 2006 audit requirements that reserves be posted for contingent tax liabilities (i.e., tax positions that could later not be sustained, and therefore had to be …

Can Joe The Plumber Support Redistribution? Law, Social Preferences, And Sustainable Policy Design, Gillian Lester

Faculty Scholarship

How does one win popular support for laws designed specifically to redistribute economic wealth? One can hardly gainsay that this is a – perhaps the – defining issue for domestic policy in the age of President Obama. Even as the recent financial crisis has exposed the need for a reliable social safety net, attempts to respond through the political and legislative arenas have triggered increasingly hostile responses among conservatives, populists, Massachusetts voters, and incipient tea partiers. The puzzle of how to attract and preserve public support for law reform aimed at redistribution – of both income and risk – is …

Taxation Of Financial Products: Options For Fundamental Reform, Alex Raskolnikov

Faculty Scholarship

The following is testimony to the joint hearing of the House of Representatives Committee on Ways and Means and the Senate Committee on Finance. The testimony discusses three benchmarks for evaluating the taxation of capital income in general and financial instruments in particular, summarizes three broad-based approaches to reforming the tax treatment of financial products, evaluates the impact of other fundamental reforms on the urgency of reforming the taxation of derivatives, and urges Congress to encourage the IRS to make detailed tax return data available for empirical research of revenue costs and other losses arising from derivatives-based tax planning.

Exclusion From Income Of Compensation For Services And Pooling Of Labor Occurring In A Noncommercial Setting, Douglas A. Kahn

Articles

When cash is received for services, it typically will constitute gross income to the recipient.' But what if the payments are made in a noncommercial setting such as the payment by a parent to a child for mowing the lawn or performing household chores? As discussed later in this Essay, there are reasons to conclude that such payments do not constitute income. The problem of how to treat receipts from a noncommercial activity frequently arises in the context of an exchange of services. A similar problem arises when services are provided by several persons pursuant to a pooling of labor …

The Politics And Policy Of The Estate Tax – Past, Present, And Future, Michael J. Graetz

Faculty Scholarship

This paper is an edited transcript of the Lloyd Leva Plaine Distinguished Lecture, delivered at the University of Miami’s Heckerling Estate Planning Institute on January 11, 2011. It reviews the history of the estate tax, discusses the politics of its bizarre repeal for the year 2010 only, and outlines the forces that led to reinstatement of the tax for 2011 and 2012 with a $5 million exemption and 35 percent top rate. The paper makes clear that the coalition pushing for repeal of the estate tax will continue to work to eliminate it and also explores potential broader implications of …

Price Includes Tax: Protecting Consumers From Tax-Exclusive Pricing, Hayes R. Holderness

Law Faculty Publications

This Note contributes to the debate regarding the behavioral effects of the salience of taxes on taxpayers by examining the impact of including the value of sales taxes in the displayed prices of goods. The Note concludes that consumers should make more beneficial decisions regarding consumption when the value of sales taxes is included in or with displayed prices.

The Fundamentals Of Wealth Transfer Tax Planning: 2011 And Beyond, John A. Miller, Jeffrey A. Maine

Faculty Publications

This article discusses basic aspects of all three transfer taxes, with particular emphasis on the estate tax. This article then outlines fundamental estate planning techniques in light of the impact of these taxes. In addition, references are provided in the footnotes to more detailed treatments of the planning techniques described here.

Happiness In Business Or Law, Peter H. Huang

Publications

This article provides a short introduction to recent happiness research and its applications to business or law that is organized as follows. Section I briefly considers: (1) troubling and not so troubling reservations about happiness research, and (2) how money and happiness are related. Section II concisely surveys two sets of applications of happiness research to business, namely: (1) workplace well-being and meaning, and (2) marketing. Section III succinctly reviews two categories of happiness research implications for law: (1) business regulation, and (2) law student and lawyer happiness.

Abolish The Inflation Tax On The Poor And Middle Class, John Plecnik

Law Faculty Articles and Essays

Inflation erodes the purchasing power of money and distorts some income tax liabilities upward, which in turn discourages savings and investment. When inflation is caused by the central bank “printing” money to fund deficit spending, it results in a transfer of real wealth from the holders of dollars or assets denominated in dollars to the government and, in normative terms, may be conceptualized as a tax. The effect of the so-called inflation tax is regressive, because low-income taxpayers often lack the sophistication or liquidity to invest in hedges against inflation. Following the double-digit inflation of the late 1970s and early …

What Would Henry Simons Do?: Using An Ideal To Shape And Explain The Economic Substance Doctrine, Charlene Luke

UF Law Faculty Publications

The law and policy governing tax shelters is incomplete, sometimes contradictory, and occasionally incoherent. Indeed, consensus has yet to emerge even as to which transactions should bear the tax shelter label. Often reform efforts are grounded in theories that are largely external to tax law—for example, economic theory relating to incentives. Fewer approaches rely on intrinsic tax policies, including that most fundamental of income tax principles—the Schanz-Haig-Simons income concept ("H-S"). Under H-S, an income tax base should be expansive, requiring inclusion of an individual's increases in wealth and allowing reductions only for non-personal costs that reduce wealth. This Article seeks …

Recent Developments In Federal Income Taxation: The Year 2010, Martin J. Mcmahon Jr., Ira B. Shepard, Daniel L. Simmons

UF Law Faculty Publications

This recent developments outline 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 the year 2010--and sometimes a little farther back in time if we 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--unless one of us decides to go nuts and spend several pages writing …

Retroactivity And The Fraud Enforcement And Recovery Act Of 2009, Matthew Titolo

Indiana Law Journal

This Article resolves confusion over the scope of the Fraud Enforcement and Recovery Act (FERA), which amends the False Claims Act (FCA), to clarify that it covers fraud against the taxpayers even where committed by and against other government contractors and subcontractors. I focus on a controversial retroactivity clause applying FERA’s expanded liability language to pre-enactment conduct. Ambiguity has led to inconsistent outcomes: some courts have ruled that FERA’s new language applies to pre-enactment conduct while others have reached the opposite result. Much of practical consequence rides on how we resolve this ambiguity—the Department of Justice is currently investigating over …

When Should Asset Appreciation Be Taxed?: The Case For A Disposition Standard Of Realization, Jeffrey L. Kwall

Indiana Law Journal

The realization requirement is one of the most basic elements of the United States income tax. Due to this requirement, any increase in the value of a person’s property is not taxed when it occurs. Rather, the tax on asset appreciation is deferred until the occurrence of a realization event; that is, until the property is transferred in exchange for money or other consideration. By contrast, all other forms of income (e.g., salary, rents) are taxed immediately.

The realization requirement is one of the most basic elements of the United States income tax. Due to this requirement, any increase in …

The Case For Dividend Deduction, Reuven S. Avi-Yonah, Amir C. Chenchinski

Articles

The December 2010 compromise between President Barack Obama and the Republicans extended the 15% tax rate on dividends through the end of 2012. At that point, however, the rate may revert to the Clinton administration rate-39.6%-or be raised to 20%-as proposed by the Obama Administration. Thus, the United States may either abandon corporate-shareholder integration, maintain partial integration, or perhaps even adopt the George W Bush administration's 2003 proposal to exempt dividends altogether-as advocated by some Republicans in Congress. Given this uncertainty and the likelihood of additional Congressional action, now may be a good time to revisit the integration issue. Another …

Tax Policy And The Efficiency Of U.S. Direct Investment Abroad, Mihir A. Desai, C. Fritz Foley, James R. Hines Jr.

Articles

Deferral of U.S. taxes on foreign source income is commonly characterized as a subsidy to foreign investment, as reflected in its inclusion among “tax expenditures” and occasional calls for its repeal. This paper analyzes the extent to which tax deferral and other policies inefficiently subsidize U.S. direct investment abroad. Investments are dynamically inefficient if they consistently generate less in returns to investors than they absorb in new investment funds. From 1982–2010, repatriated earnings from foreign affiliates exceeded net capital investments by $1.1 trillion in 2010 dollars, and from 1950–2010, repatriated earnings and net interest from foreign affiliates exceeded net equity …

A Reasonable Balance: Revenue Authority Discretions And The Rule Of Law In Canada, Kim Brooks

Articles, Book Chapters, & Popular Press

This chapter reviews the separation of powers and the exercise of law-making discretion in Canada as it relates to tax law, in particular the income tax law. The chapter concludes that Canada’s somewhat weak separation of powers has worked reasonably well in achieving the goals of the tax system and the values inherent in the rule of law.

The Meaning Of 'Enterprise,' 'Business' And 'Business Profits' Under Tax Treaties And Eu Tax Law (Canada), Kim Brooks

Articles, Book Chapters, & Popular Press

This chapter explores the meaning of business as it is used in Canadian income tax law given the four purposes that concept serves.

The Political Pathway: When Will The Us Adopt A Vat?, Reuven S. Avi-Yonah

Book Chapters

The reason the VAT is on the table is also stated in the referenced article by Orszag: "Although hardly anyone wants to admit it, we're not going to solve our budget deficit unless revenue is part of the equation." And while in the short term it may be possible to address the deficit by raising income tax rates(Orszag suggests letting all the Bush tax cuts expire in 2013}, in the long term it doesn't seem plausible that we can raise sufficient revenue that way to pay for Medicare, Medicaid, Social Security, interest on the national debt, and defense and some …

Taxation As Regulation: Carbon Tax, Health Care Tax, Bank Tax And Other Regulatory Taxes, Reuven S. Avi-Yonah

Articles

This paper addresses three questions: 1. Is regulation a legitimate goal for taxation? 2. Which tax is best suited for regulation? 3. Would it be better to allocate just one goal per tax among the major taxes (individual and corporate income tax and VAT)? It then analyzes the proposed bank tax and the enacted health care tax as regulatory taxes, and concludes that the first is desirable (as is a carbon tax) but the second is not.

U.S. Defense Contracts During The Tax Expenditure Battles Of The 1980s, Susan J. Guthrie, James R. Hines Jr.

Articles

This paper considers the impact of the tax treatment of military contractors on the cost and timing of U.S. military procurement. Prior to the early 1980s, taxpayers were permitted to defer tax obligations on profits earned from long-term contracts. Legislation passed in 1982, 1986, and 1987 required that at least 70 percent of the profits earned on long-term contracts be taxed as accrued, thereby significantly reducing the tax benefits associated with long term contracting. Comparing contracts that were ineligible for these tax benefits with those that were eligible, it appears that between 1981–1989 the duration of U.S. Department of Defense …