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Tuesday, November 30, 2004

"Changes in Latitudes, Changes in Deductions": Jimmy Buffett and Matt Lauer Discuss Hobby Loss Rules on the Today Show

Buffet TodayMatt Lauer's interview of Jimmy Buffett this morning on the Today Show provides a nice vignette for the classroom on the § 183 hobby loss rules. At around the 1:50 mark of this clip, Buffett explains how he sailed around the Caribbean for 5 years as research for his new book, A Salty Piece of Land:

  • Lauer: It's a scam. Because you call it research, you get to deduct all these trips.
  • Buffett: It's a job.

(Thanks to Bill Kulsrud (Indiana-Indianapolis, Business School) for the tip.)

November 30, 2004 in Teaching | Permalink | Comments (1) | TrackBack (0)

Tax News Roundup

Wall Street Journal (Tom Herman): How to Cut Your Tax Bill:

Millions of taxpayers still have time to take steps this year to cut their federal income-tax bills. Here are a few ideas in question-and-answer form. I will offer more in next week's column.

Washington Post: Tax-Free Bonuses Tagged Out:

Where there's a will there's a way, the old saying goes, but when it comes to ducking taxes it's more like, where there's a way someone will. Thus it is that the Treasury Department discovered not long ago that some taxpayers have been dusting off an old Internal Revenue Service ruling about signing bonuses in baseball contracts and using it to justify skipping payroll taxes and income-tax withholding on signing bonuses generally. Similarly, some unions and employers have been using that and other old IRS rulings to avoid payroll and withholding on ratification bonuses that sometimes are offered as inducements to union members to approve a new contract. In both cases, recipients are liable for income taxes when they eventually file their returns, but they and their employers can escape Social Security, Medicare and other such payroll taxes entirely. "It's a nice way to save some change," a Treasury official said. So last week, Treasury and the IRS slammed that particular door shut.

Washington Post: Tax Reform Veterans See Hurdles Ahead:

The two primary architects of Congress's last major tax reform say President Bush so far has failed to lay the groundwork for his ambitious tax agenda and will have to invest a vast amount of political capital to succeed in broadly simplifying the tax code. Former representative Dan Rostenkowski, an Illinois Democrat, who chaired the House Ways and Means Committee during the battle over the 1986 tax reform act, and former senator Robert Packwood, a Republican from Oregon, who headed the Senate Finance Committee, disagree on the ultimate prospects. Rostenkowski gives tax reform little chance while Packwood is more sanguine. But both say the president must quickly get beyond rhetoric and say what he wants to do.

November 30, 2004 in News | Permalink | Comments (0) | TrackBack (0)

Angus Delivers Lecture on The Evolution of U.S. Tax Treaties Today at NYU

Nyu_1Barbara Angus (International Tax Counsel, Office of Tax Policy, Treasury Department) delivers the Fifth Annual Lecture on Current Issues in Taxation, The Evolution of U.S. Tax Treaties: Recent Trends and Implications, today at NYU. Also participating in the program are:

There is a reception at 5:00 - 6:00 pm, with the program at 6:00 - 8:00 pm. For more information, email Meribell Wiscovitch.

November 30, 2004 in Colloquia | Permalink | Comments (0) | TrackBack (0)

Gideon Reviews Standards of Tax Practice

Standards_of_tax_practiceAs blogged here earlier, Tax Analysts has published the 6th edition of the classic book on ethical guidance for tax professionals: Standards of Tax Practice, by Bernard Wolfman (Harvard), James Holden (Steptoe & Johnson) & Kenneth Harris (Neal, Gerber & Eisenberg).

Kenneth Gideon (Skadden, Arps, Slate, Meagher & Flom LLP), Chair of the ABA Tax Section, praises the book:

The sixth edition . . . updates what is now a venerable classic and essential reference for tax professionals on the standards for and regulation of tax practice. No other work offers practicing tax professionals such comprehensive coverage of the rules, case law, and ethical standards affecting tax practice, ranging from Circular 230, to penalties leviable on practitioners, to bar and American Institute of Certified Public Accountants rules. A full chapter is devoted to an analysis of malpractice liability of tax professionals. When the standards governing lawyers and accountants differ, those differences are identified and addressed. With the rapid pace of change in those areas in recent years, the new edition is timely and addresses many recent developments.

New areas of coverage include practice separation rules under Sarbanes-Oxley, revisions to the American Bar Association Model Rules of Professional Conduct providing attorneys with greater latitude in disclosing client confidences to prevent ongoing harm to others, review of the emerging case law under code section 7525 (the accountant's privilege), due diligence requirements for preparation of earned income tax credit returns, and proposed revisions to Circular 230. The book describes and critically analyzes important recent precedents...

Wolfman, Holden, and Harris deserve the thanks of thoughtful practitioners for this readable and important compendium of law, authority, and opinion on the standards of tax practice (both aspirational and mandatory). Without regard to whether one agrees with all the authors' conclusions, no other single volume better focuses the issues confronting tax practitioners today in aspiring to and achieving ethical tax practice.

For the full review, originally published in 104 Tax Notes 1573 (2004) and reprinted with permission, see here.

November 30, 2004 in Book Club, Tax Analysts | Permalink | Comments (1) | TrackBack (0)

Bush Tax Reform Favors Red States Over Blue States

Media and blogosphere (see here and here) reports have noted that many of the Administration's tax reform proposals being kicked around favor taxpayers in Red States that voted for President Bush at the expense of Blue States that voted for Senator Kerry. For example, the Associated Press reports that the Bush Administration is considering repealing the deduction for state income taxes. It just so happens that of the 15 states that pay the most in per capita state income taxes (and thus benefit most from the deduction), 13 are Blue States; of the 15 states that pay the least in per capita state income taxes, 13 are Red States:

Blue and Red States by State Tax Deduction

(The data is from the Tax Foundation's 2003's statistics.) Note the eerie similarity with the 2004 presidential election map:

Red Blue Map for 2004 election

For prior Red State-Blue State tax posts, see:

November 30, 2004 in Political News | Permalink | Comments (0) | TrackBack (3)

Tax Advice for Bruce Willis

Bruce_willis Following up on yesterday's post on the application of §104(a)(2) to the melee involving Ron Artest that broke out at last week's Indiana Pacers - Detroit Pistons NBA game: Actor Bruce Willis has filed a lawsuit against Revolution Studios, contending that he suffered "extreme mental, physical, and emotional pain and suffering" as a result of a special effects mishap while filming the movie Tears of the Sun. Willis claims that he "was required to and did employ physicians and other medical personnel" and will incur additional future medical expenses. Willis' attorneys should heed the lessons of the Dennis Rodman case discussed yesterday and carefully allocate any damage recovery or settlement to ensure that it is received "on account of physical injuries" and thus tax-free within the meaning of §104(a)(2).

November 30, 2004 in Teaching | Permalink | Comments (1) | TrackBack (0)

Monday, November 29, 2004

Kingson Delivers Donahue Lecture at Suffolk on How Tax Thinks

SuffolkCharles Kingson (Ernst & Young; Columbia Adjunct) delivered the Donahue Lecture at Suffolk, How Tax Thinks, published at 37 Suffolk U. L. Rev. 1031 (2004). Here is part of the Introduction:

Tax thinking boils a transaction down not to labels but to who gets what why, and it forces you to examine where and how it says that. The clarity of former tax lawyers like Robert H. Jackson, Harry Blackmun, and Sumner Redstone shows that -- far from being a bunch of crazies speaking in tongues -- tax law represents just the opposite. Much of tax practice consists of trying to find logical definitions of ordinary English words (such as "sale" and "ownership"); and tax tries to root those definitions in the concerns of actual transactions.

Making definitions by connecting elements lies at the heart of tax thinking, and a delight in recognizing connections often indicates a burgeoning tax lawyer. [o test this theory, I used to give summer associates a bogus tax aptitude test  The idea of the test was that if they liked seeing the test's connections -- whether or not they got the answer -- they might like tax law. Let me try two:

1. What do Baa Baa Black Sheep, the alphabet, and Twinkle, Twinkle, Little Star have in common? Well, hum one of them. When you hum one, you hum all three; because they all have the same tune.

2. Sarah Barney Belcher of Taunton, Massachusetts, was the ancestor of which of the following?

  • Douglas MacArthur
  • Franklin Roosevelt
  • Winston Churchill
  • The answer is, all three.

    November 29, 2004 in Scholarship | Permalink | Comments (0) | TrackBack (1)

    Tax Blog Roundup

    Mauled Again: College and Graduate Students Beware:

    The recent changes made by the Congress to establish a uniform definition of "child" for federal income tax purposes included a revision of the statutory provisions defining dependent for purposes of the dependency exemption deduction.... Did Congress inadvertently, or intentionally, change the substantive dependency exemption rules when it was ostensibly conforming the language to reflect the new uniform definition of child?...

    The problem arises for college and graduate students (and in theory, preparatory school students) who live at or near the school rather than with their parents or other support-providing taxpayer....The problem exists when the child has more gross income than the exemption amount, which for 2004 is $3,100. Under the old law as applied to 2004, parents who provided more than one-half of the support of a child were entitled to claim a dependency exemption for the child if the child's gross income was less than $3,100 OR, if the child had gross income of $3,100 or more, had not yet attained age 19, but if the child had attained the age of 19 the dependency exemption was available if the child was a full-time student who had not yet attained the age of 24. So a 19-to-24-year-old child who went off to school, whose parents provided more than one-half of the support, and who earned $3,100 or more would generate a dependency exemption deduction for the parents. Under the new law, ... if the child has $3,100 or more of gross income, the parents lose the dependency exemption deduction unless the child meets the “principal place of abode” requirement.

    Tax and Business Law Commentary: Calling Arliss Michaels:

    On November 1, the Supreme Court heard oral arguments in the cases of Commissioner v. Banks and Commissioner v. Banaitis. (The Circuit Court opinions in the two cases can be found here and here.) Two revenue rulings issued by the Service this week highlight the importance of these two cases.

    November 29, 2004 in News | Permalink | Comments (0) | TrackBack (0)

    Tax Consequences of "Malice in the Palace"

    Nba ArtestLast week's NBA near-riot involving Ron Artest (and several of his Indiana Pacer teamates) and courtside Detroit Pistons fans at The Palace of Auburn Hills provides some classroom fodder for the basic income tax class. Some Tax Profs show a film clip of former Piston bad boy Dennis Rodman kicking a courtside photographer to illustrate the tax treatment of the photographer's damage recovery in Amos v. Commissioner, T.C. Memo. 2003-329 (excluding $120,000 of $200,000 as damages received "on account of physical injuries" within the meaning of §104(a)(2)).

    For further discussion of the tax consequences of the Rodman incident, see

    For the first in what promises to be a spate of lawsuits filed as a result of the melee, see here.

    November 29, 2004 in Celebrity Tax Lore | Permalink | Comments (1) | TrackBack (0)

    Foundation Press, Lexis, and West Sponsor TaxProf Blog

    Foundation_press_3 Lexis_nexis_logo_3 Thomson_west_logo_4

    We are thrilled to announce that LexisNexis has joined Foundation Press and West Publishing Company as sponsors of Tax Prof Blog and the Law Professor Blogs Network. We hope this is the beginning of a long-term relationship that will provide both financial support for our blogs and useful information about new books of interest for our readers.

    November 29, 2004 in About This Blog | Permalink | Comments (1) | TrackBack (1)

    Sunday, November 28, 2004

    Top 5 Tax Paper Downloads

    SSRN LogoThis week's list of the Top 5 Tax Paper Downloads on SSRN is the same as last week's list:   

     

    1.  The Coming Accounting Revolution: Offshore Outsourcing of Tax Return Preparation, by Jesse Robertson (Alabama, School of Accountancy), Dan Stone (Kentucky, School of Accountancy), Liza Niederwanger (Deloitte & Touche LLP), Matthew Grocki (Kentucky, School of Accountancy), Erica Martin (Crowe Chizek & Co.) & Ed Smith (Kentucky, School of Accountancy)

    2.  Book versus Taxable Income, by Frank Heflin (Northwestern, Kellogg School of Management) & William Kross (Purdue, Krannert School of Management). 

    3.  The Entrepreneurship Effect: An Accidental Externality in the Federal Income Tax, by Leandra Lederman (George Mason)

    4.  Tax Planning, Imbalance and Production, by Yoram Margalioth (Tel Aviv University), Eyal Sulganik (Interdisciplinary Center Herzliyah, Arison School of Business), Rafael Eldor (Interdisciplinary Center Herzliyah, Arison School of Business) & Yoseph Edrey (University of Haifa)

    5.  Comments on Assessing the Bush Administration's Tax Agenda, by Linda Sugin (Fordham)

    November 28, 2004 in Top 5 Downloads | Permalink | Comments (0) | TrackBack (0)

    Brody and Richmond Quoted in NLJ Story on Sklar Case

    We previously blogged the pending Tax Court case of Michael and Marla Sklar, who are trying to deduct their children's private school tuition based on the IRS's decision involving the Church of Scientology. Tax Profs Evelyn Brody (Chicago-Kent) and Gail Levin Richmond (Nova) are quoted in a recent National Law Journal article, Scientology Settlement Puts IRS in a Kosher Pickle:

    • "It's not clear that [plaintiffs] Michael and Marla Sklar will win, but if they do, it may well mean that millions of families will be able to deduct some portion of private religious school education," said professor Evelyn Brody, a Chicago-Kent College of Law tax specialist. "It would force the IRS to deal with millions of dollars in new deductions and it would overwhelm them."...Brody, who serves on the American Bar Association Tax Committee, said the Ninth Circuit U.S. Court of Appeals has already ruled on the disparate treatment argument. "They said it doesn't matter how the Scientologists are treated, and, anyway, the Scientologists shouldn't have gotten what they did," Brody said. "That's why we're all watching the case -- we've been expecting it. [She] added, "When the IRS settled with the Scientologists, after they'd beaten them, we knew deductions for tuition would come into question."
    • If the Sklars prevail, it will drive the issue back to Congress, according to Gail Richmond, a professor of law and associate dean at the Shepard Broad Law Center of Nova Southeastern University in Florida. "It will force the IRS to come up with a calculation and the next fight will be over where that line is," she said.

    For further discussion of the issues raised in Sklar, see Allan Samansky, Deductibility of Contributions to Religious Institutions, 24 Va. Tax Rev. 65 (2004), previously blogged here.

    November 28, 2004 in New Cases | Permalink | Comments (0) | TrackBack (0)

    Student Note: Should Scholarships for Graduate Students Be Taxed?

    The Federal Tax System and Treatment of Scholarships for Graduate Students: Should Scholarships be Taxed? 48 St. Louis U. L.J. 1501 (2004), argues "Yes":

    This Note addresses the tax disadvantage that non-scholarship graduate school students face when compared with graduate students that receive scholarships... Part II of this Note will discuss the historical background of sections 117 and 127 of the Internal Revenue Code. Section 117 provides that all scholarships are to be tax-free and section 127 provides guidance for employer educational assistance programs. This part also will show a differentiation between undergraduate and graduate students and argue that scholarships should be treated differently for graduate students. Part III will discuss the current tax breaks available to graduate students and explain why they fail to level the playing field. Part IV will analyze the need for higher education, the cost of education, and why scholarships for graduate students should be taxed to alleviate the current inequalities. Finally, Part V will conclude that scholarships should be taxable as income for graduate students and propose alternative solutions to this problem.

    November 28, 2004 in Scholarship | Permalink | Comments (0) | TrackBack (0)

    Saturday, November 27, 2004

    Spotlight_1

    Lily Batchelder (NYU)

        • A.B. 1994, Stanford
        • M.P.P. 1999,  Harvard, Kennedy School of Government
        • J.D. 2002, Yale

     

    Batchelder_1Lily initially became interested in tax law for its potential to "simultaneously affect poverty, broad disparities of income and opportunity, and economic growth." After college (Stanford University), she worked as a client advocate in a small soup kitchen in central Brooklyn, which fueled her interest in these issues.

    Lily then attended public policy school (Harvard's Kennedy School of Government, where she was a Kennedy Fellow and President of the Kennedy School Student Government) and law school at Yale (where she was Book Review Editor of the Yale Law Journal, Executive Editor of the Yale Human Rights & Development Law Journal, Recipient of the Clifford L. Porter Prize for Best Paper on Taxation in 2001 and 2002, Founder and Director of the Pro Bono Network, and Director of the Lowenstein International Human Rights Project).

    While Lily thought when she was at the Kennedy School that she might want to focus on tax in law school and eventually teach, she says, "I wasn't sure if tax law just involved rote memorization of rules. It wasn't until I attended my first tax class in law school and opened the casebook that I fell in love with the subject. Virtually everything I wanted to think about and work on was covered in that class."

    Since law school, Lily has been enjoying practicing at Skadden, Arps in Washington and New York, where her practice has focused on a broad  array of transactional and tax policy issues. She says she is grateful to her mentors at Skadden, Yale and the Kennedy School for encouraging her to go into teaching. "I still can't quite believe that I am going to be paid to do this."

    Lily will be joining the NYU faculty in January. Her scholarly interests currently center on intersections between tax and social policy. "I am interested in the extent to which tax policy should be used to address some of the economic challenges that individuals and families face, like limited savings, balancing work and family obligations, and income volatility." In her first article, "Taxing the Poor: Income Averaging Reconsidered," 40 Harv. J. on Legis. 395 (2003), she argues that the current income tax system places undue burdens on those with volatile incomes, and makes the seldom-acknowledged point that income volatility is both more pronounced, and more onerous from a tax standpoint, for low-income families. As a solution, Lily proposes a progressive tax policy that, in certain instances, would average incomes over a two-year period.

    In her spare time, she enjoys traveling, serving on the board of the soup kitchen where she worked, and watching (generally bad) big-budget action movies.

    Each Saturday, TaxProf Blog shines the spotlight on one of the 700+ tax professors in America's law schools. We hope to help bring the many individual stories of scholarly achievements, teaching innovations, public service, and career moves within the tax professorate to the attention of the broader tax community. Please email me suggestions for future Tax Prof Profiles. For prior Tax Prof Profiles, see here.

    November 27, 2004 in Tax Prof Spotlight | Permalink | Comments (0) | TrackBack (0)

    Brody Takes Issue with Review of Fremont-Smith's Governing Nonprofit Corporations

    Freemontsmith_3Evelyn Brody (Chicago-Kent), takes issue with Corwin Kruse's review of Marion R. Fremont-Smith, Governing Nonprofit Corporations: Federal and State Law and Regulation (Harvard Univ. Press, 2004), Sin, Salvation, and the Law of Charities, 31 Wm. Mitchell L. Rev. 383 (2004), blogged here on Tuesday. Here is Evelyn's critique, originally posted on the TaxProf Email Discussion Group (and reprinted here with permission for the benefit of the broader tax community):

    I am writing to disagree strongly about recommending this uninformed review of Marion Fremont-Smith's new book on nonprofit regulation. The review author (a student) has no appreciation for the landmark status of this book. Most important, in claiming that it is "unlikely that attorneys experienced in the area of nonprofit law will find much new in this work" but that "the book would prove useful for students or for practitioners who occasionally work with charities and desire an overview of the legal landscape," the review author betrays a fundamental lack of understanding of the practice of nonprofit law. Most firms do not have a "nonprofit law" department: The problems of nonprofit clients are handled primarily by tax lawyers. But charity governance is not just (or even initially) a matter of tax-exemption, and corporate lawyers are similarly uninformed about the special considerations that apply to the organization and governance of nonprofit clients. It is precisely these otherwise able practitioners who will find Fremont-Smith's book essential. I cannot imagine practicing in this area without frequently consulting it.

    In 1965 the Russell Sage Foundation published a volume carrying the deceptively modest title "Foundations and Government: State and Federal Law and Supervision." By writing this work, Marion Fremont-Smith single-handedly launched American regulation of charities as a rigorous field for legal scholarship and practice. While there is still no single "law of nonprofit organizations" – or even charity law – Fremont-Smith’s book endeavored to pull together the relevant common law and statutory provisions of property, wills and trusts, nonprofit corporations, as well as Federal and State tax laws. Nearly 40 years later, this classic volume has finally been replaced by the only legal expert qualified to do so: Fremont-Smith herself. Like the earlier project, the new book presents the history of philanthropy law in England and elsewhere, the evolution of American charity regulation by both Congress (through the tax code) and the States, and an analysis of the current weaknesses and recommendations for reform. Let me add that this book is the talk of the many nonprofit conferences I've attended since it was published in April, praised by regulators as well as practitioners.

    By way of background, Fremont-Smith's experience with the regulation of nonprofit organizations began when she served in the early 1960’s as assistant attorney general and director of the Division of Public Charities in Massachusetts. She subsequently practiced with Choate, Hall & Stewart until 1997, when she became senior counsel and joined, as a senior research fellow, the Hauser Center for Nonprofit Organizations of the Kennedy School of Government at Harvard University. Among her numerous voluntary positions, Fremont-Smith has served on the boards of INDEPENDENT SECTOR, the Council on Foundations, and the Foundation Center, and as chair of the Exempt Organization Committee of the ABA Tax Section. Most recently, she and Joel Fleishman are serving as co-directors of the INDEPENDENT SECTOR’s Expert Advisory Group, assisting its Panel on the Nonprofit Sector respond to the invitation of the Senate Finance Committee for IS's recommendations to strengthen nonprofit governance.

    November 27, 2004 in Book Club | Permalink | Comments (2) | TrackBack (0)

    Do Tax Court Judges Invest in Tax Shelters?

    EckhoffThe Sacramento Bee reports that California's 150 worker's compensation judges are six times more likely to file on-the-job injury cases than their judicial counterparts in state government. 29 of California's 184 worker's comp judges (15.8%) have filed worker's comp claims, compared to 9 of 378 (2.4%) other administrative law judges in California:

    These gatekeepers of cash and medical benefits for injured workers have claimed injuries from rearranging artwork, slipping on a lunchroom puddle, loading a crate in a trunk or tripping over a phone cord. One filed a claim for writer's cramp [Robert Eckhoff, pictured on the left].

    Who judges the judges? Their colleagues on the workers' comp bench. Who represents them in court? Sometimes, the very same lawyers and doctors who bring cases before them.

    (Thanks to reader Ben Cunningham for the tip.)

    November 27, 2004 in News | Permalink | Comments (2) | TrackBack (0)

    Friday, November 26, 2004

    Turkey tax code cartoon

    A TaxProf Thanksgiving:

  • Jack Bogdanski's Thanksgiving Video
  • What Jim Maule is Thankful For
  • For the record, the Carons spent an Ohio Thanksgiving here
  • Other law professor bloggers offer these Thanksgiving thoughts:

  • Tenessee's Glenn Reynolds (of InstaPundit) serves up a particularly delicious turkey
  • Iowa's Tung Yin (of The Yin Blog) ponders the wisdom of cancelling law school classes the entire week of Thanksgiving (put me down as a "yes")
  • Northwestern's Jim Lindgren (of The Volokh Conspitacy) ponders the first Thanksgiving
  • Wisconsin's Ann Althouse (of Althouse) serves pork loin
  • November 26, 2004 in Tax Profs | Permalink | Comments (0) | TrackBack (0)

    Borchard Foundation Announces New Grant Opportunities for Tax Research on the Elderly

    Borchard_logoThe Borchard Foundation Center on Law and Aging has announced the availability of four $20,000 Research Grants. The grants will fund "research and scholarship about new or improved public policies, laws and/or programs that will enhance the quality of life for the elderly (including those who are poor or otherwise isolated by lack of education, language, culture, disability, or other barriers)."

    The publication deadline is March 1, 2005, with the winners announced May 15, 2005. For a list of prior grant recipients, see here. For further information, email the Executor Director here.

    November 26, 2004 in Scholarship | Permalink | Comments (0) | TrackBack (0)

    Tax Scammer's Clients Included Sandra Bullock

    Sandrabullock A follow-up to Tuesday's post about the arrest of tax fraud promoter Jerome Schneider: the L.A. Times reports that among the names of clients on the list seaized by the IRS was Sandra Bullock, who paid Schneider $100,000 for tax advice about purchasing an offshore bank in the Cayman Islands:

    Bullock's father, John, saw an advertisement promoting Schneider's tax shelter advice in an in-flight airline magazine in 1996. Intrigued, the Bullocks paid to have Schneider fly from Vancouver to New Orleans to meet [with Bullock's attorneys].... The gist of Schneider's claim was this: People could buy an offshore "shell" bank — one without any real depositors or business activity — and have it "owned" on paper by a foreign person or entity. The U.S. investor could then use the bank to accumulate investment income, without having to pay U.S. taxes on the money.

    (Thanks to the Tax Guru for the tip.)

    November 26, 2004 in Celebrity Tax Lore | Permalink | Comments (2) | TrackBack (0)

    Jensen on Family Limited Partnerships

    Pittsburgh_tax_review_1Ronald Jensen (Pace) has published The Magic of Disappearing Wealth Revisited: Using Family Limited Partnerships to Reduce Estate and Gift Tax, 1 Pitt. Tax Rev. 155 (2004). Here is part of the abstract:

    A "family limited partnership" is a popular device designed to minimize, or even eliminate, gift and estate tax. Typically, a taxpayer will transfer his or her business (or possibly liquid assets) to a limited partnership in exchange for a general partnership interest representing a minute part of the partnership’s equity (say 1%) and limited partnership interests representing the bulk of the equity (say 99%). The taxpayer then gives the limited partnership interests to his beneficiaries, generally over a period of years, taking full advantage of the annual exclusion and the unified gift tax credit. The limited partnership interests are valued at a deep discount from the value of the underlying assets they represent on the ground that such interests lack control and are difficult to market. Courts have generally allowed discounts of from 25 to 35%, and in some cases, even more. IIn this manner, a taxpayer can transfer the bulk of his estate to his beneficiaries at little or no transfer tax.

    In this article, Professor Jensen concludes that the discounts allowed by the courts are proper under existing valuation principles. He argues, however, that these principles frequently undervalue the true worth of a limited partnership interest, because they artificially treat the donee of such an interest as an “outsider” and thus ignore many elements of value that exist when a business is owned by a family....

    On the other hand, the proposals for reform, such as the attribution and aggregation approaches that are described in the article, succumb to the opposite fallacy: they assume complete solidarity and unanimity among the different the family members. Drawing on the extensive literature on family businesses, the article demonstrates that in many cases, the fact that a business is a “family” business exacerbates, rather than ameliorates, the inevitable disputes that arise in a business. In such cases, unresolved emotional issues that even the family members themselves may not recognize intensify the business dispute. The family member who holds a minority interest in these cases will be treated no better, and possibly even worse, than an “outsider.” Such family squabbles occur most often between a parent and a child and between siblings.

    To avoid the weaknesses of both the current law and the attribution or aggregation approach, Professor Jensen proposes an intermediate solution that would disallow discounts for lack of control and lack of marketability where a family limited partnership is formed for the “principal purpose” of qualifying gratuitous transfers for such discounts....

    November 26, 2004 in Scholarship | Permalink | Comments (1) | TrackBack (0)

    Thursday, November 25, 2004

    Happy Thanksgiving from President Bush

    A great Thanksgiving cartoon via the Tax Guru:

    Turkey tax code cartoon

    November 25, 2004 in Political News | Permalink | Comments (2) | TrackBack (0)

    Democrats Block GOP Attempt to Delete Provision Giving Congressional Committees Access to Tax Returns

    A follow-up on Monday's post about the GOP's backtracking from a measure giving committee chairmen access to tax returns

    November 25, 2004 in Political News | Permalink | Comments (0) | TrackBack (0)

    Abrams on Distributions from Leveraged Partnerships

    Pittsburgh_tax_review_2Howard Abrams (Emory) has published Simple Distributions from Leveraged Partnerships, 1 Pitt. Tax Rev. 131 (2004). Here is the abstract:

    Pursuant to Code § 731(a)(2), a non-liquidating cash distribution is free of tax to the extent the distribution does not exceed the adjusted basis of the distributee's partnership interest. However, if there is any partnership debt – even simple recourse debt – the effects of a distribution can be surprisingly complex. Using several examples of partnership cash distributions, this article shows that such distributions can produce wildly counter-intuitive results.

    In each example, a simple cash distribution works a rearrangement of the partnership’s indebtedness, and these rearrangements cause the simple distribution rules in §§ 731 through 733 to produce counterintuitive results. In some cases, a distribution by an indebted partnership will increase each partner’s outside basis while restoring some of the lost basis to a partner who was given a distribution beyond the partner’s adjusted basis. In other cases, the debt reallocation following a distribution gives extra outside basis to the distributee partner and takes outside basis from the nondistributee partner.

    The article shows that the regulations promulgated under § 752 fail to allocate recourse debt in a sensible, intuitive way. That failure arises because the analysis mandated by the regulations assumes all potential capital account deficits are attributable to partnership indebtedness. A more nuanced look at capital account deficit restoration obligations demonstrates that partnership recourse debt should be allocated in accordance with loss sharing percentages and that such a rule will be difficult to apply only when special allocations of partnership loss make determining loss sharing percentages difficult to define.

    November 25, 2004 in Scholarship | Permalink | Comments (0) | TrackBack (0)

    Wednesday, November 24, 2004

    Doctors and the IRS

    Irs_logo_7 DoctorIn my federal income tax course, I often joke about the rich doctors who are parties to some of the seminal cases in the field. The IRS yesterday released a Fact Sheet for Medical Professionals (FS-2004-15) indicating that a growing number of doctors have shifted from aggressive tax planning to criminal tax evasion:

    Doctors and the IRS

    Roth & Company notes that "the IRS has yet to issue fact sheets for lawyers and accountants."

    November 24, 2004 in IRS News | Permalink | Comments (2) | TrackBack (0)

    New Australian Centre for Tax System Integrity Web Site

    AussieThe Australian Centre for Tax System Integrity, a joint undertaking of the Australian Taxation Office and Australian National University, has revamped its web site.  Among the components are:

       

     

    November 24, 2004 in Miscellaneous | Permalink | Comments (0) | TrackBack (0)

    Gale on Tax Liabilities of Families with Children

    William Gale (Brookings Institution) has posted Tax Bracket and Tax Liabilities for Families With Children on the Tax Policy Center web site. Here is the abstract:

    Providing a helping hand to families with children is a common theme of many policy interventions, from Head Start to the child tax credit. Almost all recent social policy initiatives, however, including those that aim to help families and children, have occurred on the tax side of the ledger, typically as credits or deductions. At the same time, there has been increased resistance in Congress to providing credits that are refundable — that is, that benefit taxpayers (and their children) even if their net income tax liability falls to zero.

    The table shows why opposition to making new or existing credits refundable spells bad news for the ability of any new policy to aid children in general, and lowincome children in particular. Almost half of all children live in households that currently do not pay any federal income tax (net of credits). About 80% of children who live with single parents are in households that do not pay any federal income tax. Unless a new tax credit or an expansion of a tax credit is made refundable, the subsidy cannot help those children, who are presumably the most economically vulnerable.

    November 24, 2004 in Think Tank Reports | Permalink | Comments (1) | TrackBack (0)

    Welcome to the Tax Blogosphere: Clarissa Potter

    New_blogs A hearty welcome to the newest member of the Tax Prof blogosphere: Clarissa Potter (Georgetown) yesterday launched Academically Taxing with this announcement: 

     

    Although I've created this blog primarily for the students in my income tax courses (you go Hoya Tax Geeks!), taxation is such a titillating subject and all that no doubt there will be multitudes of other readers. Just one request--keep your friggin ideas about how we shouldn't have taxes to yourselves, OK. We're here to talk about what the rules are and not get all muddleheaded by wacky anti-tax protesters. And please, don't comment from a speeding car--that's just plain ol' dangerous. PONCH AND JON, WE HAVE A REPORT OF A HIGH-SPEED TAX EVADER...

    By my count, Clarissa is the fifth tax professor with a blog, and the first who is not a middle-aged white guy:

    (I have not counted for this purpose Vic Fleischer's A Taxing Blog, on hiatus for over a year, and the nascent Tax Policy Blog from Loyola-L.A., which does not list a Tax Prof author.)

    Pretty soon, we all will be wearing pajamas at AALS Tax Section and ABA Teaching Tax meetings! (If Bogdanski wears this, count me out!: 

    Bogdanski_1

     

     

     

     

     

     

    November 24, 2004 in Tax Profs | Permalink | Comments (1) | TrackBack (0)

    Vaillancourt Presents Fiscal Federalism and Fiscal Disequilibrium in Canada Today at Toronto

    Lu on Exemption Standard for Educational Institutions

    Lynn Lu has published Flunking the Methodology Test: A Flawed Tax-Exemption Standard for Educational Organizations that "Advocate[] a Particular Position or Viewpoint," 29 N.Y.U. Rev. L. & Soc. Change 377 (2004). Here is part of the Conclusion:

    This article has attempted to show, through examination of the educational advocacy regulatory scheme, legislative history, case law, and the elements of charitable trust common law as read into section 501(c)(3) in Bob Jones, that the current educational exemption scheme raises unacceptable risks of arbitrary and discriminatory enforcement. The scheme's focus on the ostensibly objective methodology test for "full and fair exposition" applicable only to educational organizations that "advocate[] a particular position or viewpoint" obscures the threshold question of which organizations are controversial enough to be subject to the test. Methodology thus offers a mask of objectivity that merely shifts the subjective inquiry to the earlier and less explicit determination of when an organization's controversial views constitute advocacy of "a particular position." The danger that the content of an organization's ideology alone could be grounds for denial of tax exemption counsels abandonment of the regulatory scheme governing exemption for educational advocacy organizations in favor of reliance on existing safeguards under Bob Jones that are applicable to all section 501(c)(3) organizations regardless of advocacy.

    November 24, 2004 in Scholarship | Permalink | Comments (0) | TrackBack (0)

    Tuesday, November 23, 2004

    Tabor on Taxation by Tribal Governments

    Anna-Marie Tabor has published Sovereignty in the Balance: Taxation by Tribal Governments, 15 U. Fla. J.L. & Pub. Pol'y 349 (2004). Here is part of the Conclusion:

    Tribes that choose to invite nonmembers into their communities should be free to regulate the resulting relationships, including -- if they wish -- through the power to tax. They should have the same authority as other sovereigns to tax those who benefit by entering their jurisdiction. Given the current state of the case law, however, Tribes should work within the existing framework to shape tax provisions that can survive judicial review. This Article has suggested a number of areas over which valid taxes might be imposed, focusing on preemption, consent, and self-governance. Tribes should also work to prevent the states from imposing taxes that effectively oust tribal jurisdiction. Ultimately, however, a legislative solution is needed to restore full tribal tax power. The NCAI proposal addresses several important issues by expanding tribal jurisdiction, limiting state jurisdiction, and providing federal payments to states to compensate for lost revenue. Passage of this statute or another legislative solution may be the most effective way for tribes to reclaim full tribal taxation powers and use fiscal policy to build economically strong communities.

    November 23, 2004 in Scholarship | Permalink | Comments (0) | TrackBack (0)

    R.I.P. Redux: Glenshaw Glass

    Class_3glenshaw_glass_2 Press reports out of Pittsburgh indicate that the venerable Glenshaw Glass Company, known to generations of tax professors, lawyers, and students as the party in the seminal Supreme Court case on the definition of income, is in the final stages of shutting its doors after 109 years in business. In the Introduction to our Tax Stories book, I summarize Joseph Dodge's wonderful description of why Glenshaw Glass is one of the ten most important cases in the tax law: 

     

    Tax_stories_cover_2Joseph M. Dodge’s opening chapter focuses on perhaps the central question in the nascent income tax: the nature of income subject to tax. Yet the the tax law struggled with this question for over forty years before the Supreme Court decided Commissioner v. Glenshaw Glass in 1955. The narrow holding in the case -- that punitive damages recovered by a plaintiff in commercial litigation constitutes gross income -- seems quite obvious to us with the benefit of hindsight. Indeed, the doctrine emerging from Glenshaw Glass –- that "windfall gains" are included in gross income -– also strikes us today as the only sensible outcome. But Professor Dodge unearths the great doctrinal and theoretical uncertainty faced by the parties in Glenshaw Glass as they struggled to give content to the Code's use of the phrase "gross income." The Court’s opinion established two enduring principles of the income tax: (1) that the Code, not language in judicial opinions, is the ultimate source of tax law; and (2) that the term "gross income" in the Code is a catch-all phrase that reaches all accessions to wealth, regardless of source, and not specifically excluded elsewhere in the Code. In addition, Glenshaw Glass set the income tax on a modern footing, "free of the clutter and distractions inherited from the nineteenth century and early twentieth century."

    (Thanks to Myron Grauer (Capital) for the tip. For earlier TaxProf Blog coverage, see here.)

    November 23, 2004 in News | Permalink | Comments (0) | TrackBack (0)

    High-Speed Police Chase of Tax Scofflaw

    Chips2Roth and Company have a funny follow-up post, Ponch and Jon, We Have a Report of a High-Speed Tax Evader, on this morning's  TaxProf Blog post about David Cay Johnston's New York Times report on the high-speed police chase on California's highways of tax scofflaw Al Thomspon. Thompson was one of 5 businessmen featured in a USA Today ad bragging that they did not pay any income taxes or withhold taxes for their employees. Roth notes that three of the other four men have met law enforcement fates similar to Thompson (absent the high-speed theatre). 

    November 23, 2004 in News | Permalink | Comments (0) | TrackBack (0)

    New Book: Fremont-Smith on Governing Nonprofit Corporations

    Freemontsmith_3Corwin Kruse has published Sin, Salvation, and the Law of Charities, 31 Wm. Mitchell L. Rev. 383 (2004), reviewing Marion R. Fremont-Smith, Governing Nonprofit Corporations: Federal and State Law and Regulation (Harvard Univ. Press, 2004). Here is the Conclusion:

    Governing Nonprofits presents a detailed summary of the laws governing charitable organizations. It is unlikely that attorneys experienced in the area of nonprofit law will find much new in this work. Nonetheless, the book would prove useful for students or for practitioners who occasionally work with charities and desire an overview of the legal landscape. Fremont-Smith's book is most valuable with respect to federal law. Its utility regarding state law is more limited due to variations among multiple jurisdictions; however, the book does provide a synopsis of general trends.

    Particularly helpful in dealing with multi-jurisdictional issues is the appendix. It contains several tables summarizing the laws of each state governing the creation, administration, and dissolution of charities; the standards for applicability of the cy pres doctrine in each jurisdiction; and the fiduciary duties required in each state. These tables provide a handy roadmap to the applicable sections in each state's statutes. My primary criticism of Governing Nonprofits relates to Fremont-Smith's discussion of proposed improvements to laws governing charities. I would have preferred a more detailed assessment and analysis regarding various suggestions. After the detailed history and analysis of current state and federal law, the discussion of proposals for future reforms seemed incomplete.

    Such criticism aside, Governing Nonprofits provides a functional general reference to the law of charities. Students and practitioners looking for an introduction to this area may find it a useful addition to their bookshelves.

    November 23, 2004 in Book Club | Permalink | Comments (0) | TrackBack (0)

    Tax News Roundup

    The American Thinker (via the Tax Guru): Taxing Thoughts:

    George Bush will, he says, be spending some political capital on revamping the tax code. Let us hope he pursues this goal with the same iron determination he has shown in transforming Iraq. Simply stated, the federal tax code is a scandal that puts the lie to any legitimate claim of personal liberty in this country.

    New York Times: G.O.P. Constituencies Split on Tax Change:

    Stephen Moore, the president of a conservative fund-raising group, wants to overhaul the tax code. So do Dr. Richard Land of the Southern Baptist Convention and Grover Norquist, president of Americans for Tax Reform, a conservative group. They just don't agree on how to do it.

    Even though it will be months before President Bush proposes an overhaul of the income tax, key Republican groups are already divided about how or even whether to proceed. Regardless of which path Mr. Bush pursues, he is likely to be pulled by conflicts between parts of his political base. Economic conservatives share an ideological belief in flattening income tax rates and eliminating as many tax preferences as possible. And business groups want to preserve breaks for research, oil drilling, health insurance, equipment leasing and scores of other purposes. Christian conservatives want to promote charitable deductions and "family values," and may want to defend tax breaks for married couples with children.

    New York Times: Bush Job Plan Features Tax Cuts, Drilling:

    Hiring is picking up and President Bush is on track to preside over job growth in his second term, shedding the Herbert Hoover label of being the first president since the Great Depression to lose jobs under his watch. But don't expect a revival of the booming 1990s. Bush's prescription for job growth includes extending the tax cuts passed in his first term, overhauling tax laws, limiting jury awards in lawsuits and increasing domestic energy exploration and production.

    New York Times: Seven Ways to Save on Taxes (Just Don't Wait Until 2005):

    Because tax rates have declined on investment income, it is easy for investors to think that taxes aren't a big deal anymore - and that traditional year-end tax moves are less important than they were in the past.

    New York Times (David Cay Johnston): Leading Foe of Income Tax Is Arrested After Car Chase:

    Al Thompson, a businessman who openly acknowledged that he did not pay taxes or withhold them from employee paychecks, was arrested yesterday on fraud and other charges after a highway car chase near Redding, Calif. His accountant, a former criminal investigator for the Internal Revenue Service, was also arrested, at his home in San Jose. Both men are prominent figures in a movement that contends no law requires the payment of taxes and that the federal government illegally extracts them.

    New York Times: I.R.S. Audits More of the Wealthy and Fewer Small Companies:

    The Internal Revenue Service, in the midst of a crackdown on aggressive tax shelters, is auditing significantly more wealthy individuals and large companies, but is increasingly shying away from scrutinizing smaller businesses. The I.R.S. released fresh data yesterday showing that the number of high-income taxpayers - defined as individuals earning $100,000 or more - audited in the 2004 fiscal year rose 40 percent from the previous year.

    Tax Analysts: Istook Denies Inserting Taxpayer Privacy Measure in Omnibus Funding Bill:

    In a November 22 statement, Rep. Ernest J. Istook Jr., R-Okla., denied he was the source of a controversial taxpayer privacy provision in the omnibus appropriations bill passed by Congress on November 20.

    Wall Street Journal: Tax Vow Weighs on Berlusconi:

    Having failed so far to deliver on repeated promises of a sweeping tax cut, Italian Prime Minister Silvio Berlusconi has painted himself into a political corner from which he frantically is trying to escape.

    Wall Street Journal (Tom Herman): Will the AMT Spur Change in the Tax System?:

    [T]he rapid growth of the alternative minimum tax is boosting the pressure on Congress to overhaul the entire federal tax system.

    Wall Street Journal: Web Tax Holiday:

    In another Congressional miracle (see above for more), the Members have decided to use this lame-duck session to perform the good deed of renewing the Internet tax moratorium. Barring some procedural hiccup, Web access fees will be officially off limits to the tax man for at least a few more years.

    Wall Street Journal:  Ex-Promoter of Tax Shelters Urges Clients: Surrender to IRS:

    A former tax-shelter promoter, facing the prospect of prison time, renounced his illegal tax schemes yesterday and urged his clients to surrender to the Internal Revenue Service. "Anyone who has read my book or who is thinking of going offshore should know they are going to be caught," Jerome Schneider, 53 years old, said in a telephone interview. "This has just been a disaster," said Mr. Schneider, author of tax-avoidance books such as "Hiding Your Money" and "Jerome Schneider's Complete Guide to Offshore Money Havens." The books were advertised in publications such as The Wall Street Journal and the in-flight magazine Sky Mall. Mr. Schneider promoted his tax-avoidance plans at conferences in Vancouver, British Columbia; Maui, Hawaii; and Cancun, Mexico.

    Washington Post: Who Will Get Caught in the IRS's Sights?:

    It's the audit heard 'round the nonprofit world. On Oct. 8, the IRS notified the National Association for the Advancement of Colored People that the organization may have violated the prohibition on partisan activity by nonprofits. Specifically, the IRS said it was initiating an investigation because NAACP Board Chairman Julian Bond made "statements in opposition of George W. Bush for the office of the presidency" in a 45-minute speech on July 11 at the group's annual convention.

    The inquiry takes on heightened significance because of the NAACP's status as a public charity. "Charity" may be a misnomer, but it's one shared by the million or so nonprofits that qualify for tax-exempt status under section 501(c)(3) of the nation's tax code. Such nonprofits are entitled to accept tax-deductible donations, but the law is emphatic in declaring that those dollars may not be used in election campaigns or other partisan activities. This makes sense: Surely there's no reason why tax-deductible donations should be used to pay for ads by groups such as the Swift Boat Veterans or MoveOn.org -- or a church's activities on behalf of one candidate or another.

    But if the principle is clear, distinguishing between partisan activity and protected free speech is anything but. That's why the IRS investigation has the nonprofit world anxious and angry. The stakes are huge: If a nonprofit is found to be in violation of the political prohibitions in 501(c)(3), the ultimate penalty is revocation of its tax deductibility. For many nonprofits, losing this privileged status would threaten their very existence. For the NAACP, says Bond, "It would be catastrophic." If donors could not take a tax deduction, many would not give -- or, if they did, they would give less. Foundation grants would disappear.

    Is the IRS taking a harder line and sending a message? Or did the NAACP, the nation's oldest and largest civil rights organization, violate a prohibition that it was surely aware of?

    Washington Post: IRS Chief Pleads for Bigger Budget; Investing in Enforcement Could Help Reduce Deficit, Commissioner Says:

    Internal Revenue Commissioner Mark W. Everson called on Congress yesterday to boost the agency's funding by the full $500 million requested by President Bush, calling it a way to help shave the record federal budget deficit.

    November 23, 2004 in News | Permalink | Comments (0) | TrackBack (1)

    IRS Attorney Directory by Code Section & Subject Matter

    Irs_logo_1The monthly update of the 121-page directory of attorneys in the IRS Chief Counsel's Office, arranged by Internal Revenue Code Section and Subject Matter, is available on the Tax Analysts' web site.

     

    November 23, 2004 in IRS News | Permalink | Comments (0) | TrackBack (0)

    Monday, November 22, 2004

    Bobonis on Income Transfers and Marital Dissolution Today at UC-Berkeley

    BobonisGustavo Bobonis (Ph.D. Candidate, UC-Berkeley Dep't of Economics) presents Income Transfers, Marital Dissolution, and Intra-Household Resource Allocation: Evidence from Rural Mexico at the UC-Berkeley Department of Economics today at 4:00 - 6:00 PST.

    November 22, 2004 in Colloquia | Permalink | Comments (0) | TrackBack (0)

    Dharmapala Presents Corporate Tax Avoidance and Incentives Today at UC-Berkeley

    Uc_berkeley_1 Dhammika Dharmapala (University of Connecticut, Economics) presents Corporate Tax Avoidance and High Powered Incentives (with Mihir Desai (Harvard Business School)) at the UC-Berkeley Department of Economics today at 2:00 - 4:00 PST. Here is the abstract:

    This paper analyzes the links between corporate tax avoidance, the growth of high-powered incentives for managers, and the structure of corporate governance. We develop and test a simple model that highlights the role of positive feedback effects between tax sheltering and managerial diversion in determining how high-powered incentives influence tax sheltering decisions. The model generates the testable hypothesis that firm governance characteristics determine how incentive compensation changes sheltering decisions. In order to test the model, we construct an empirical measure of corporate tax avoidance - the component of the book-tax gap not attributable to accounting accruals - and investigate the link between this measure of tax avoidance and incentive compensation. We find that, for the full sample of firms, increases in incentive compensation tend to reduce the level of tax sheltering, suggesting a complementary relationship between diversion and sheltering. As predicted by the model, the relationship between incentive compensation and tax sheltering is a function of a firm's corporate governance. Our results may help explain the growing cross-sectional variation among firms in their levels of tax avoidance, the undersheltering puzzle, and why large book-tax gaps are associated with subsequent negative abnormal returns.

    November 22, 2004 in Colloquia | Permalink | Comments (0) | TrackBack (0)

    Saez Presents The Evolution of Income Concentration in Japan Today at UC-Berkeley

    SaezEmmanuel Saez (UC-Berkeley, Economics) presents The Evolution of Income Concentration in Japan, 1887-2003: Evidence from Income Tax Statistics (with Chiaki Moriguchi (Northwestern University, Economics)) at the UC-Berkeley Department of Economics today at 2:00 - 4:00 pm PST. Here is the abstract:

    Using income tax statistics, this paper presents long-run series of top income shares in Japan between 1885 and 1949 and of top wage income shares between 1951 and 2002. The data indicate that (1) throughout the pre-World War II period, Japan exhibited a high degree of income concentration comparable to the United States during the same period; (2) the top 1% income shares in Japan fell precipitously during World War II but not during the immediate postwar years; and (3) the top 1% wage income share in Japan has been relatively stable between 1951 and 2002, in contrast to the sharp increase in the top share in the United States after the 1970s. The paper evaluates the findings from historical and comparative perspectives and investigates the causes of the changes in income concentration.

    November 22, 2004 in Colloquia | Permalink | Comments (0) | TrackBack (0)

    Gates and Garvey Debate Federal Estate Tax Today at University of Washington

    Uw_logoWilliam H. Gates Sr. (President, Bill and Melinda Gates Foundation) and Michael D. Garvey (Of Counsel, Garvey, Schubert Barer, Seattle) engage in A Debate on the Federal Estate Tax -- Pros and Cons today at the University of Washington from 3:30 - 5:00 pm PST as part of its Distinguished Scholars Series:

    While the federal estate tax – a charge on a deceased person’s property - is one of the oldest and most common forms of taxation, it is also one of the most controversial and hotly contested. For several years, it has been the center of a vociferous policy debate. Former President Clinton vetoed Congress’ vote to abolish the tax in 1999 and 2000, while President Bush favors its abolition. Advocates of the estate tax abolition feel that it hinders economic growth, destroys small businesses and leads to fraud. Those who support the estate tax counter that the tax affects only the wealthiest 2 percent of Americans who die, contending that it helps provide equality, reduces the concentration of wealth, encourages charitable giving and provides almost $30 billion in revenue per year.

    GatessrWilliam H. Gates, Jr.: “The estate tax is a reasonable tax on the unearned windfall of a fortunate heir. Certainly, in the present fiscal situation of our country this is not the time to repeal a fair tax which will produce important revenue over the years ahead.”

     

       

        

    GarveyMichael D. Garvey: "The estate tax does not appear to achieve any societal objectives that are claimed for it, and there seem to be much better ways to raise revenue for the government."   

     

     

     

    November 22, 2004 in Colloquia | Permalink | Comments (0) | TrackBack (0)

    Joint Tax Committee Releases Description of Technical Corrections Act

    GOP Backtracks from Measure Giving Committee Chairmen Access to Tax Returns

    New York Times: G.O.P. Says Motive for Tax Clause in Budget Bill Was Misread:

    Democratic leaders and senators from both parties expressed outrage on Sunday about an obscure provision in the huge end-of-session spending bill that would allow the chairmen of the Appropriations Committees and their staff assistants to examine Americans' income tax returns. Republican leaders said that their motives had been misread and that there was never any intention to invade the privacy of taxpayers. They promised that the provision would be deleted from the bill in a special session on Wednesday before the spending measure, which cleared Congress on Saturday night, was sent to President Bush for his signature.

    Wall Street Journal: Senate Democrats Denounce IRS Privacy Measure In Bill:

    A key privacy law governing taxpayer records was changed by an item buried in the large year-end spending bill approved by Congress. The measure approved Saturday would give chairmen of the House and Senate Appropriations committees, and their aides, access to IRS facilities and confidential taxpayer returns. The change generated intense criticism from Democrats such as Sen. Max Baucus, D-Mont. He charged Republicans with weakening a privacy law enacted to prevent Nixon-era meddling in taxpayer records. Amid this criticism, Republican leaders vowed to repeal the measure in a subsequent bill, perhaps later this week, said John Scofield, spokesman for the House Appropriations Committee.

    CNN: Frist: Tax-Returns Measure Indefensible; Senate Leaders Vow Author Will be Held Accountable:

    Senate Majority Leader Bill Frist said Sunday that "accountability will be carried out" against whoever slipped a provision into an omnibus spending bill that would have allowed two committee chairmen to view the tax returns of any American. "I have no earthly idea how it got in there," Frist said on CBS's "Face The Nation." "Nobody is going to defend this." The language was caught and removed in the Senate on Saturday, but the House will have to approve the fix before the spending bill can be sent to the White House for President Bush's signature.

    Associated Press: GOP Embarassed by Tax Returns Measure:

    Congress passed legislation Saturday giving two committee chairman and their assistants access to income tax returns without regard to privacy protections, but not before red-faced Republicans said the measure was a mistake and would be swiftly repealed.

    Tax Analysts: Congress Approves Omnibus Appropriations Bill Despite Disclosure Glitch:

    Both chambers of Congress on November 20 passed the fiscal 2005 omnibus appropriations bill (H.R. 4818), although controversy over a provision to expand the disclosure of tax return information almost derailed Senate passage. Despite strong Democratic criticisms, the House passed the bill with an overwhelming 344-51 vote. The measure then made it through the Senate by a 65-30 vote. The omnibus package ties together fiscal 2005 funding for nine remaining appropriations measures and includes $10.3 billion for the Internal Revenue Service.

    The Senate controversy stemmed from section 222 in the Transportation and Treasury title, which was briefly mentioned during House debate but created a stir when Senate Finance Committee member Kent Conrad, D-N.D., brought it to the attention of his colleagues. The section would have allowed “agents” designated by the chair of either chamber’s Appropriations Committee “access to Internal Revenue Service facilities and any tax returns or return information contained therein.”

    TaxGuru:

    For anyone who remembers how Presidents Nixon and Clinton used the IRS to attack and persecute their political enemies, this kind of thing isn't a positive addition to the tax code and it should frighten anyone concerned about privacy that such language is being sneaked into legislation.

    November 22, 2004 in News | Permalink | Comments (0) | TrackBack (0)

    Sunday, November 21, 2004

    Top 5 Tax Paper Downloads

    SSRN LogoThere is a new paper in this week's list of the Top 5 Tax Paper Downloads on SSRN, debuting at # 5: 

    1.  The Coming Accounting Revolution: Offshore Outsourcing of Tax Return Preparation, by Jesse Robertson (Alabama, School of Accountancy), Dan Stone (Kentucky, School of Accountancy), Liza Niederwanger (Deloitte & Touche LLP), Matthew Grocki (Kentucky, School of Accountancy), Erica Martin (Crowe Chizek & Co.) & Ed Smith (Kentucky, School of Accountancy)

    2.  Book versus Taxable Income, by Frank Heflin (Northwestern, Kellogg School of Management) & William Kross (Purdue, Krannert School of Management). 

    3.  The Entrepreneurship Effect: An Accidental Externality in the Federal Income Tax, by Leandra Lederman (George Mason)

    4.  Tax Planning, Imbalance and Production, by Yoram Margalioth (Tel Aviv University), Eyal Sulganik (Interdisciplinary Center Herzliyah, Arison School of Business), Rafael Eldor (Interdisciplinary Center Herzliyah, Arison School of Business) & Yoseph Edrey (University of Haifa)

    5.  Comments on Assessing the Bush Administration's Tax Agenda, by Linda Sugin (Fordham)

    November 21, 2004 in Top 5 Downloads | Permalink | Comments (0) | TrackBack (0)

    William Mitchell Symposium on Exempt Organizations Law

    William_mitchellThe William Mitchell Law Review has published a symposium on Exempt Organizations Law, 31 Wm. Mitchell L. Rev. 1-302 (2004):

    November 21, 2004 in Scholarship | Permalink | Comments (0) | TrackBack (0)

    Gale & Orszag on Bush Administration Tax Policy: Starving the Beast

    William Gale (Brookings Institution) & Peter Orszag (Brookings Institution) have posted  Bush Administration Tax Policy: Starving the Beast on the Tax Policy Center web site. Here is part of the Introduction:

    This is the seventh installment in a series that summarizes and evaluates tax policy in the Bush administration. Prominent public supporters of the tax cuts are sometimes willing to acknowledge, at least privately, the weakness of many of the various public justifications for the policies, including the supposed effect on long-term growth or as a short-term stimulus. The supporters will nonetheless maintain that the tax cuts were still a good idea because the "real" purpose was to contain the size of government. This article examines links between the enacted tax cuts and the goal of "starving the beast" — that is, holding down government spending.

    November 21, 2004 in Scholarship | Permalink | Comments (0) | TrackBack (0)

    Saturday, November 20, 2004

    Spotlight_1

    Craig Boise (Case Western)

        • B.A. 1991, University of Missouri-Kansas City
        • J.D. 1994, University of Chicago
        • LL.M (Taxation) 1999, New York University

     

    BoiseLike a number of other new tax professors, Craig arrived at the profession by a rather circuitous route. He began college as a piano performance major but ran out of money after two years and, in desperate need of a job, became a police officer in Kansas City, Missouri. It was in the police academy that he developed an interest in law while learning 4th, 5th and 6th Amendment constitutional law cases. He spent five years with the department - including a stint as a member of the SWAT team - returning to college during his last two years to complete a degree in political science. 

    Craig says that he chose the University of Chicago for law school on the strength of its “reputation for academic rigor.” As a student there, he was a recipient of the Thomas R. Mulroy Prize for Excellence in Appellate Advocacy, and served as Director of Cases for the Hinton Moot Court Board. It was Craig’s then-future wife, April (also a Chicago law student), who persuaded him to take the federal income tax course with her. He reluctantly agreed, hoping that doing so might someday lead to their filing a joint tax return. Much to his surprise, he enjoyed the course (and married April). He credits professors Joseph Isenbergh and Daniel Shaviro with stimulating his interest in tax law.

    About a year after completing a clerkship on the U.S. Court of Appeals for the Eighth Circuit, Craig and April moved to New York, where he practiced at both Cleary Gottlieb and Akin Gump. His practice involved a host of domestic and international tax issues relating to mergers and acquisitions, reorganizations, joint ventures, financial products, structured finance, REIT transactions and securities offerings. While in New York, Craig also completed an LL.M in Taxation at New York University in 1999. After their first child was born, Craig and April moved to her hometown of Cleveland, Ohio, where he joined Thompson Hine LLP.

    Craig’s interest in teaching initially was sparked during several lengthy telephone conversations with former law school classmate Steven Bank, who was teaching at Florida State at the time. He soon realized that teaching offered what he most wanted from the law - the chance to pursue his intellectual curiosity about legal rules and to share his knowledge with others. After interviewing with a number of schools, Craig joined the faculty of Case Western Reserve University School of Law in the fall of 2003. He teaches basic federal income tax, international tax and international tax policy. His scholarly interests are in the areas of corporate tax abuse and the impact of domestic and international tax rules on corporate behavior.

    Craig says he has learned a great deal from some outstanding tax law professors and from the wealth of experience provided by private practice, as well. “The list of people I have been taught by, or had the opportunity to work with, reads like a “who’s who” of the world of tax law,” he adds.

    Craig is active in the ABA Tax Section; he currently chairs its Diversity Committee and is a former subcommittee chair for the Committee on Foreign Activities of U.S. Taxpayers. In his spare time, Craig enjoys sailing, reading and, yes, playing the piano.

    Each Saturday, TaxProf Blog shines the spotlight on one of the 700+ tax professors in America's law schools. We hope to help bring the many individual stories of scholarly achievements, teaching innovations, public service, and career moves within the tax professorate to the attention of the broader tax community. Please email me suggestions for future Tax Prof Profiles. For prior Tax Prof Profiles, see here.

    November 20, 2004 in Tax Prof Spotlight | Permalink | Comments (0) | TrackBack (0)

    Stiglitz and Peterson Discuss Future of U.S. Economy at Wharton

    Whartonlogo In two separate talks at Wharton recently, Nobel prize-winning economist Joseph Stiglitz and Pete Peterson, chairman of The Blackstone Group, lamented what they see as the sorry state of the U.S. economy, and then presented their views on how to fix it. Not surprisingly, the answers offered by Stiglitz, former chairman of the Council of Economic Advisors under President Clinton, and Peterson, former Secretary of Commerce under President Nixon, have little in common, although both fault the Bush administration for failing to adequately address some of the country's toughest issues, ranging from Social Security reform and budget deficits to persistent unemployment and economic inequality. For more details, see here.

    November 20, 2004 in News | Permalink | Comments (0) | TrackBack (0)

    Burman & Kobes on Composition of Income on Tax Returns

    Leonard Burman (Brookings Institution) & Deborah Kobes (Urban Institute) have posted Composition of Income Reported on Tax Returns on the Tax Policy Center web site. Here is the abstract:

    A consumption tax would eliminate tax on the normal return to capital.  That is, it is effectively a tax on wages and salaries.  This Tax Fact column looks at the composition of income by income level.  On most tax returns, wages and salaries are the dominant source of income. But for very high income taxpayers, wages are only a fraction of income.

    November 20, 2004 in Think Tank Reports | Permalink | Comments (0) | TrackBack (0)

    Friday, November 19, 2004

    What Tax Profs Are Reading . . . Bogdanski on Positively Fifth Street

    Bookclublogo Jack Bogdanski (Lewis & Clark) reviewed James McManus's Positively Fifth Street: Murderers, Cheetahs, and Binion's World Series of Poker on his blog:

     

    Book_cover_2So much of my working life is spent reading and editing, and so much of my leisure time is spent on the internet, that I don't get a chance to read books for pleasure as much as I would like. But occasionally I squeeze one in, as I just did with James McManus's Positively Fifth Street. As a former newspaper reporter and an aspiring card shark, I greatly enjoyed McManus's acount of his 2000 visit to Las Vegas, wherein (a) playing as a rookie, he reached the finals of the World Series of Poker and (b) he covered the trial of the couple accused of murdering Las Vegas gambling magnate Ted Binion. If you're part of the current craze of watching poker tournaments on television (I'm told more people now catch poker on the tube than hockey), or if you like a good yarn, you'd like this book, too.

    November 19, 2004 in Book Club | Permalink | Comments (0) | TrackBack (0)