Wednesday, January 19, 2005
Several changes over the last several decades have introduced new challenges into the problem of income tax base definition. The unacknowledged liabilities have proliferated -- a function of the adoption of section 461(h) and the expansion of the demand for deferred compensation subject to section 404. The repeal of General Utilities has brought with it the relatively new pretense that it is possible to equate at any one point in time the overall value of a going derived by adding up the value of its assets -- both positive and negative -- with the the market value of interests in the entity. Increasing sophistication in the design of financial products has resulted in more situations in which the usual reliance on the distinction between well-specified obligations to repay in cash and other obligations produces less sensible results. As exemplified both by the transactions that led to the enactment of sections 357(d) and 358(h) and by the obvious inadequacies of the solutions, our tax accounting for anticipated costs has simply not proved up to the challenge.