TaxProf Blog

Presidential Candidate Admits to Reading Tax Code and Regs "Cover to Cover"

This month's "Shop Talk" column in the Journal of Taxation has a great item on John Cox, long-shot 2008 Republican presidential candidate.  From an article quoting Cox in the Chicago Sun-Times:

When I had a dose of experience, I tried to move up, applying to Coopers and Lybrand, a large firm. Since I had the experience, they took a chance on me, even though I didn't go to a great Ivy League college. While there, I did what I advise, I read everything -- I read the entire Internal Revenue Code, the regulations and something called the BNA portfolios on taxes -- all cover to cover.  All this while going to law school at night. I got to the office at 5:30 a.m. and left at 6 p.m. to go to law school at night.

NY Times: Property Tax Dispute Threatens Band of Polygamists

Interesting New York Times article:  Property Tax Dispute Threatens Band of Polygamists, by Kirk Johnson:

Thousands of polygamists are engaged in a highly unusual standoff here over property taxes that could ultimately cost them their houses or thrust them into a mainstream America they fear and despise.

In one corner is a group of 8,000 or so adherents of the Fundamentalist Church of Jesus Christ of Latter Day Saints, an offshoot of the Mormon Church that had long paid the property taxes of its members, sometimes even rolling a wheelbarrow through meetings to collect the needed cash.

At the other corner is a stocky accountant from Salt Lake City, Bruce R. Wisan, who says he is determined to help the church members even if they do not want it.

The church hierarchy is in chaos. Its former leader is on the run, facing criminal charges of arranging sex between a minor and an adult in a polygamous marriage, leaving the old tax-collection system in shambles. Now the property taxes for hundreds of houses — around $1.3 million — are overdue and mounting. The church's remaining leaders have told people living in the houses not to pay. Mr. Wisan has promised to make them do so. A state judge appointed him last year to oversee the land on which most church members live. A trust the church established generations ago controls the land.

(Hat Tip:  Ann Murphy.)

Reverse Engineering the U.S. News Law School Rankings

Seth J. Chandler (Houston) has reverse engineered the U.S. News law school rankings in Analyzing US News & World Report Rankings Using Symbolic Regression.

Seth has developed a four-factor model that predicts the U.S. News law school rankings with an R-Squared statistic of 97.7%.  The four factors are:

• Peer reputation rating (Peer)
• Employed at nine months after graduation (Employed9)
• Student-faculty ratio (SFRatio)
• 75th percentile UGPA (UGPA75)

The formula is:  8.3124  + 0.04139Peer(1.1487Employed9-SFRatio)UGPA75

Example:  Connecticut has a Peer rating of 2.9, an Employed9 rating of 96.4, a SFRatio of 11.8, and a UGPA75 of 3.63. The model predicts a score of 51, which is Connecticut's actual U.S. News score.

Seth also has developed a seven-factor model that predicts the U.S. News law school rankings with an R-Squared statistic of over 99%.

In our article, Ranking Law Schools:  Using SSRN to Measure Scholarly Performance, 81 Ind. L.J. 83, 87 n.9 (2006), we discuss the claim by Tom Bell (Chapman) that he has reverse engineered the U.S. News rankings:

• The Puzzle of Penn Law School's Ranking (5/24/05)
• Gory Details, by Demand (5/24/05)
• Rank This Job (5/1/05)

IRS on Tax Consequences of Receipt of Gift from Charity

The IRS recently released Information Letter 2006-0027, which noted that "payments made by a tax-exempt organization, pursuant to its purpose statement, to help needy individuals pay for the cost of an adoption" are nontaxable gifts and not income:

Situation 2 of Rev. Rul. 2003-12, 2003-1 C.B. 283, considered whether a grant received by an individual under a § 501(c)(3) charitable organization’s program to pay or reimburse certain expenses incurred as a result of a disaster was includable in the individual’s gross income. Rev. Rul. 2003-12 cites Rev. Rul. 99-44, 1999-2 C.B. 549, for the proposition that “in general, a payment made by a charity to an individual that responds to the individual’s needs, and does not proceed from any moral or legal duty, is motivated by detached and disinterested generosity.” In Situation 2 of Rev. Rul. 2003-12, the grants made by the charitable organization are designed to help distressed individuals with unreimbursed medical, temporary housing, or transportation expenses they incur as a result of a flood. Under these facts, Rev. Rul. 2003-12 concludes that payments made by the § 501(c)(3) charitable organization are made o ut of detached and disinterested generosity rather than to fulfill any moral or legal duty and, thus, are excluded from the gross income of the recipients under § 102. Rev. Rul. 2003-12 also concludes that the amounts excluded from gross income under the ruling are not subject to information reporting under § 6041.

Thus, payments analogous to those described in your letter have been held to be gifts and, therefore, not includible in the recipient’s gross income or subject to information reporting if the payments are made directly to the needy individuals.

Deductions Do Really Grow on Trees

Form N-12, Hawaii Individual Tax Form (Line 33): 

Exceptional trees deduction (attach affidavit)

Hawaii Individual Income Tax Instructions (Page 38):

Line 33 Exceptional Trees Deduction. You may deduct up to $3,000 per exceptional tree for qualified expenditures you made during the taxable year to maintain the tree on your private property. The tree must be designated as an exceptional tree by the local county arborist advisory committee under chapter 58, HRS. Qualified expenditures are those expenses you incurred to maintain the exceptional tree (excluding interest) that are deemed “reasonably necessary” by a certified arborist. No deduction is allowed in more than one taxable year out of every three consecutive taxable years. The deduction is allowed for amounts paid in taxable years beginning after December 31, 2003.

An affidavit signed by a certified arborist stating that the amount of expenditures are deemed reasonably necessary must be attached to your tax return. The affidavit also must include the following information: (1) type of tree, (2) location of tree, and (3) description and amount of expenditures made in 2005 to maintain the tree. The affidavit must be notarized.

(Hat Tip:  Tax Policy Blog.)

Law Deans' Tenure Challenge

We previously have blogged (links below) the American Law Deans Association's challenge to the ABA's authority to use its accreditation power to require tenure or long-term contracts for deans, faculty, clinical faculty, legal writing instructors, and law library directors.  Recent developments:

• Law Deans Criticize Their Accreditor, by Doug Lederman (Inside Higher Ed)
• Law Deans Deans Association Criticizes ABA Accreditation Standards, by David Bernstein (The Volokh Conspiracy)
• Bernstein on the Law Deans, Tenure, and the ABA, by Josh Wright (Truth on the Market)
• Reluctance To Call Required Preferences Required Preferences, by Josh Rosenberg (Discriminations)
• The Gatekeeper Effect on Law School Tenure, by Jim Downey (Rants & Raves on Just About Everything)

Prior TaxProf Blog coverage:

• Law Deans' Association Fights Tenure Requirement (4/3/06)
• More on Law Deans' Tenure Challenge (4/4/06)

Saturday:

• Tax Prof Profile:  Jeffrey Kwall
• Where Do Your Tax Dollars Go?
• Application of Constructive Receipt Doctrine to Direct Deposit of Checks
• Kansas Faculty Making More Than $100k Subject to New Financial Disclosure Law
• Hanson & Sandalow on Greening the Tax Code

Sunday:

• Baylor Law Dean Closes Law Library for Son's Prom Dinner, Disrupting Students Preparing for Finals
• Top 5 Tax Paper Downloads
• Law Review and Court Citations to Legal Blogs
• IRS Wins First Court Test of "Son of Boss" Tax Shelter
• IRS on Tax Consequences of Extreme Makeover: Home Edition Reality TV Show
• WSJ: Can Bloggers Make Money?

Baylor Law Dean Closes Law Library for Son's Prom Dinner, Disrupting Students Preparing for Finals

Our sister Brian Leiter's Law School Reports flags this interesting story:  Baylor Law Dean Closes Law Library for Son's Prom Dinner, Disrupting Students Preparing for Finals.  See the full story here from the Waco Tribune:

The dean of Baylor Law School said he was wrong to let his son use part of the school’s library for a high school prom dinner Saturday evening as law students prepared for finals. Some law students were upset Saturday when they learned that the library would not be available to them between 4 and 8 p.m., as Dean Brad Toben’s son and about 40 classmates were using a portion of the library for the dinner. Final exams for the spring quarter began Saturday and run through Friday.

Top 5 Tax Paper Downloads

There is a bit of movement in this week's list of the Top 5 Recent Tax Paper Downloads on SSRN, with two new papers debuting at #4 and #5.  Stephen Cohen's paper has risen to #42 all-time (out of 1741 tax papers on SSRN):

1.  [385 Downloads]  Words!  Words!  Words!  Teaching the Language of Tax, by Stephen B. Cohen (Georgetown) [blogged here]

2.  [239 Downloads]  Inside Zarin, by Theodore P. Seto (Loyola-L.A.) [blogged here]

3.  [176 Downloads]  Financial Accounting and Corporate Behavior, by David I. Walker (BU) [blogged here]

4.  [146 Downloads] Earnings Management and Corporate Tax Shelters, by Mihir A. Desai (Harvard Business School) & Dhammika Dharmapala (University of Connecticut, Economics) [blogged here]

5.  [99 Downloads] Taxing Undocumented Immigrants: Separate, Unequal and Without Representation, by Francine J. Lipman (Chapman) [blogged here]

Law Review and Court Citations to Legal Blogs

Ohio State 3L Ian Best continues to do fascinating blog data mining on his 3L Epiphany blog.  In recent days, he has posted data on the number of law review articles and cases that cite legal blogs.  The hands down winner:  our sister Sentencing Law & Policy blog by Doug Berman (Ohio State).  Only four legal blogs have been cited by both law review authors and judges:

Blog	Law Review Citations	Case Citations	Total Citations
Sentencing Law & Policy	60	21	81
The Volokh Conspiracy	41	1	42
Legal Theory Blog	24	1	25
How Appealing	19	1	20

IRS Wins First Court Test of "Son of Boss" Tax Shelter

Press reports of the Government's victory in the first court test of the "Son of Boss" tax shelter (RJT Investments X LLC v. Commissioner, Tax Ct. No. 011769-05 (4/19/06)):

• New York Times:  U.S. Judge Backs I.R.S. Ruling Invalidating Tax Shelter, Possibly Aiding U.S. Criminal Case, by Lynnley Browning
• Wall Street Journal:  IRS Gets a Victory on Tax Shelter, by Robert Guy Matthews & David Reilly
• Tax Analysts:  Government Scores Procedural Win in Son-of-BOSS Case

IRS on Tax Consequences of Extreme Makeover: Home Edition Reality TV Show

We have extensively blogged the proper tax treatment of payments received by taxpayers who participate in ABC's Extreme Makeover: Home Edition reality TV show (links below).  The IRS recently released Information Letter 2006-0012, in response to a request from Congresswoman Marsha Blackburn (R-TN):

The producers . . . pay applicants $50,000 to rent their homes for 10 days. The producers advise the applicants that the home improvements are non-taxable under § 280A(g).  The constituent asked that the Congress close this loophole and that the IRS ensure taxes are paid on income won on reality TV shows.

Due to disclosure and privacy laws, I cannot provide specific tax or taxpayer information on a taxpayer's case to anyone other than the taxpayer or the taxpayer's authorized representative. However, I can provide general information, which I hope is helpful....

To the extent that the value of the improvements constitutes a prize or an award, however, it cannot also be considered rent, and therefore could not qualify for the exclusion from gross income under § 280A(g).

• Extreme Makeover = Extreme Taxes? Tax Consequences of Home-Makeover TV Shows (5/10/04)
• More on Extreme Makeover = Extreme Taxes (5/12/04)
• Yet More on Extreme Makeover = Extreme Taxes (5/14/04)
• Extreme Makeover: Taxpayer Edition (7/5/04)
• More on Extreme Makeover: Taxpayer Edition (2/2/05)
• Student Note on Extreme Makeover (10/13/05)
• More Scholarship on Tax Consequences of Extreme Makeover: Home Edition (12/4/05)

WSJ: Can Bloggers Make Money?

The Wall Street Journal hosted an interesting (at least to me!) online debate on Can Bloggers Make Money? between Jason Calacanis (Co-Founder of Weblogs, Inc.) and Alan Meckle (CEO of Jupitermedia Corp.):

Blogs have a lot of buzz, but there's still considerable debate about whether that can translate into profits.

While many blogs remain little more than amateur diaries, several bloggers have tried to parlay their online ramblings into branded businesses. One, Jason Calacanis, co-founded Weblogs Inc., a network of blogging sites that was acquired last year by AOL. Mr. Calacanis has been an outspoken proponent of blogs as business vehicles, arguing that quality content can drive enough traffic to attract advertisers.

But longtime Internet entrepreneur Alan Meckler is skeptical. Mr. Meckler, who is chief executive of Jupitermedia Inc., believes that some blogs may achieve a measure of success, but doubts most blogs will be able to generate meaningful profits.

Jeffrey L. Kwall (Loyola-Chicago; Visiting at Northwestern)

• B.A. 1977, Bucknell
• M.B.A. 1981, Penn
• J.D. 1981, Penn

 

 

I never contemplated a teaching career. After working my way through college, I set my sights on becoming a corporate lawyer in a big Wall Street firm. But the twists and turns of life lead one in unexpected directions.

After spending the summer after my first year of law school at a Philadelphia megafirm, the security of knowing I had a good home if desired allowed me to try something very different during my second summer. I found a mid-size firm in Beverly Hills that had begun as a tax boutique and evolved into a thriving general business practice. What a summer that was! My eyes were opened to the joys of a transactional practice where you did the tax work and executed the transaction in an environment that was nothing short of spectacular. But having spent my entire life in Pennsylvania, I wasn’t ready to give up the changing seasons so I spent my third year of law school searching for that Beverly Hills practice in an eastern (relatively speaking) locale. That search took me to many cities, one of which was Chicago, a place that I had never before seen but instantly felt like home.

I practiced full-time for three years at a mid-size Chicago firm that, much like the Beverly Hills firm, had begun as a tax boutique. I worked under a brilliant mentor; a meticulous practitioner with the best judgment of any lawyer I have ever known. The firm did sophisticated tax work but, due to its size, rarely encountered the same issue twice. The focus in those days was on quality of work and I was afforded the luxury of taking the time needed to develop the expertise to handle each new matter. I spent weeks at a time with triangular mergers, tiered partnerships, cancellation of indebtedness, corporate penalty taxes, controlled foreign corporations, DISCs – unbelievable intellectual stimulation tempered by the nuts and bolts of actually executing transactions.

As luck would have it, a sudden opportunity arose in the spring of 1984 to join the full-time faculty at Loyola, Chicago and, after much soul searching, I decided to take it. Looking back, it was the best decision I made in my life (I should say the second-best decision, in case my wife happens to read this). To hedge my bets, I retained an of-counsel relationship with my old firm for more than 20 years during which time I continued to reap the benefits of real world practice.

Teaching all these years at Loyola has been a great pleasure, in large part due to my tax colleagues Anne-Marie Rhodes and Christian Johnson, outstanding teachers who remain as enthusiastic and excited about tax as ever and whom I am privileged to regard as my friends. The three of us worked for years as a team, with the encouragement and support of our former Dean Nina Appel, to develop a J.D. tax curriculum with great depth that students flock to in increasing numbers. In recent years, we have enjoyed enrollments of 70-80 in Corporate & Partnership Tax, 30-40 in Advanced Corporate Tax and 50-60 in Estate & Gift Tax. In each year, we have conferred Tax Certificates on 25-30 graduating J.D.s who complete five specified tax courses while satisfying a stringent GPA requirement.

I have followed a broad research agenda over the years, focusing on corporate tax reform as well as pervasive common-law issues (most recently, the open-transaction doctrine and the step-transaction doctrine). My greatest satisfaction, however, stems from the consolidated corporate and partnership tax casebook that I began writing after the repeal of General Utilities rule, the third edition of which was published by Foundation Press last year. Developing a book to teach corporate and partnership tax on a comparative basis enabled me to draw on my teaching, writing and practice experiences over the years and truly represents who I am as a professional. I have enjoyed adapting the book over the past decade to meet the constantly changing business tax landscape while attempting to meet the challenge of maintaining a cohesive work as the tax law becomes increasingly complicated and unprincipled.

In recent years, I have explored interests outside the tax area – teaching the first-year course in real property from a planning perspective and serving as a co-author on a leading property casebook. I have also developed a law school course in financial planning and have written in that field. One of the challenges I hope to respond to in the near future is the critical need for augmenting the financial sophistication of professionals in all disciplines.

I am thoroughly enjoying my visit at Northwestern Law School this semester. The Northwestern tax faculty has been warm and welcoming and the weeks have flown. It has been refreshing to be a part of Northwestern’s fine tax program.

Finally, I am extremely blessed with a wonderful wife of 25 years, Roberta (an accomplished intellectual property professor at DePaul Law School), and three beautiful daughters who have given me the greatest joys (along with some of the greatest challenges) of my life. I’ll save my philosophy on raising teenage daughters for another day.

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.

Where Do Your Tax Dollars Go?

Joe Milner, a computer progammer in Utah, has a cool web site, Where Are My Taxes.  You type in your 2005 federal tax liability, and the site calculates where, to the penny, your tax dollars go among dozens of agencies, departments, and programs.  For example, $4,000 of a $25,000 federal tax liability goes for the Treasury Department, broken down as follows: 

 

Alcohol & Tobacco Tax Bureau $4.55
Bureau of the Public Debt $2.73
Financial Crimes Enforcement Network: $0.91
Financial Management Service: $98.34
Interest on Treasury securities: $2,259.98
Interest paid to trust fund accounts: $1,642.63
Interest paid to expenditure accounts: $55.54
Interest paid to Federal fund accounts: $50.99
Tax law enforcements: $43.71
Tax Information systems: $15.48
Tax Private collection agent program: $0.91
IRS other expenses: $528.12

Application of Constructive Receipt Doctrine to Direct Deposit of Checks

The IRS recently released Information Letter 2006-0005, which provides guidance on the application of the constructive receipt doctrine in the context of the direct deposit of checks:

Generally, we consider checks income to a cash method taxpayer in the year he or she receives them unless constructively received in an earlier year. The fact that a check is issued in one year and received in another does not make the check taxable in the year issued. Checks sent through the mail are typically taken into income in the year the taxpayer actually receives them, unless the amounts are made available to the taxpayer in the earlier year. In other words, unless the taxpayer had access to or control over the check in the first year, no constructive receipt of the check occurred in the first year and the taxpayer should recognize the income in the second year when he or she actually received the check. However, if a taxpayer has the option of receiving payments by direct deposit instead of by checks sent through the mail, there may be constructive receipt of a payment on the earlier date that the direct deposit would have been made.

Kansas Faculty Making More Than $100k Subject to New Financial Disclosure Law

Kansas faculty making over $100,000 must filed a financial disclosure statement under a new state law (46-247).  Here are some of the questions faculty must answer:

• List any corporation, partnership, proprietorship, trust, joint venture and every other business interest, including land used for income, and specific stocks, mutual funds or retirement accounts in which either you or your spouse has owned within the preceding 12 months a legal or equitable interest exceeding $5,000 or 5%, whichever is less.
• List any person, business or combination of businesses from which you or your spouse either individually or collectively, have received in the preceding 12 months, without reasonable and valuable consideration, goods or services having an aggregate value of $500 or more.
• List all places of employment in the last calendar year, and any other businesses from which you or your spouse received $2,000 or more in compensation (salary, thing of value, or economic benefit conferred on you or your spouse in return for services rendered, or to be rendered), which was reportable as taxable income on your federal income tax returns.
• List any organization or business in which you or your spouse hold a position as officer, director, associate, partner or proprietor at the time of filing, irrespective of the amount of compensation received for holding such position.
• List each client or customer who paid fees or commissions to a business or combination of businesses from which fees or commissions you or your spouse received an aggregate of $2,000 or more in the preceding calendar year.

For more:

• List of Kansas faculty making over $100,000
• Kansas Professors Assail New Law on Financial Disclosure, Chronicle of Higher Education
• New, Little-Known Law that Requires Disclosure of Financial Details Angers Some KU Professors, Lawrrence Journal-World
• Number of Employees Who Earn $100K Rises, Lawrrence Journal-World

Hanson & Sandalow on Greening the Tax Code

Craig Hanson (World Resources Institute) & David B. Sandalow (Brookings Institution) have posted Greening the Tax Code on the Brookings Institution web site.  Here is the abstract:

In recent years several Republican and Democratic governors have imposed new pollution taxes, often winning bipartisan acclaim. A growing number of commentators have supported such measures at the federal level.

Analysis indicates that taxes on air and water pollution could generate substantial revenue for the U.S. Treasury while improving environmental quality, stimulating technological innovation and enhancing energy security. Reducing tax expenditures with adverse impacts on natural resources could do the same. As lawmakers explore ways to reduce federal budget deficits and reform the tax code, they should consider measures that shift more of the tax burden onto activities—such as pollution—that make the economy unproductive or reduce quality of life.

This policy brief examines fiscal instruments that both raise revenue and help improve environmental quality. The paper analyzes several different types of pollution taxes, considers current tax expenditures with adverse environmental impacts, discusses ways of integrating these instruments into tax reform packages and suggests directions for further research

Bartlett to Step Down as Dean at Duke

Duke announced today that Katharine T. Bartlett, dean since 2000, is stepping down as dean, effective June 30, 2007:

Bartlett's decision to step down comes as the school completes a five-year strategic plan. "The last five years we have pushed hard to add a record number of exceptional new faculty, recruit an increasingly talented student body and strengthen the school's commitment to community, leadership, and faculty-student collaboration," Bartlett said. "The law school is well positioned now to attract a strong leader who can build on what the faculty has achieved in the last several years."

One of Bartlett's most important goals for the remainder of her deanship is the completion of the school's building initiatives, which include renovation of the law library and a new atrium that will provide much needed space for students and public functions. Under Bartlett's leadership, nearly all of the school's classrooms have been renovated and a 30,000-square-foot addition has expanded space for faculty as well as for clinic and journal offices.

Here is part of an email sent by Dean Bartlett to the Duke community:

It is with mixed feelings that I tell you that I am stepping down as dean of Duke Law School on June 30, 2007.

Being dean at Duke Law School has been an extraordinary privilege for me and I am proud beyond words to be associated with this place. By the end of next year, however, I will have been dean for 7-1/2 years, and I am ready to start my path back to teaching and research. Working together, we have achieved a great deal in these years, and the Law School is in a good position to attract strong leadership for the School's next chapter ahead.

I thank you for all of your support and look forward to continuing to work with you over the coming year to maintain and improve the excellence of Duke.

Update:  Brian Leiter has more here.

6th Circuit Splits on Standard of Review to be Applied to Tax Court Determination in Debt v. Equity Case

Indmar Products Co. v. Commissioner, No. 05-1573 (6th Cir. 4/14/06), produced three separate opinions on the appropriate standard of review to be applied to the Tax Court's holding that a majority shareholder's advances advances to his corporation should be treated as equity contributions rather than as loans.

Judge McKeague, writing for the majority, held that the advances were loans rather than contributions to equity, reversing the Tax Court:

Indmar Products Co., Inc. (“Indmar”) appeals the decision of the Tax Court to disallow interest deductions the company claimed for tax years 1998-2000, and to assess accuracy-related tax penalties for those years. The interest deductions relate to a number of advances made to Indmar by its majority stockholders over several years. Indmar argued at trial that the advances were legitimate loans made to the company, and thus it could properly deduct the interest payments made on these advances under § 163(a). The Tax Court, following the position taken by the Commissioner, disagreed, concluding that the advances were equity contributions and therefore the company could not deduct any purported interest payments on these advances. The court imposed penalties on Indmar based on the deductions. Indmar Prods. Co., Inc. v. Comm’r, T.C.M. 2005-32.

Upon review of the record, we conclude that the Tax Court clearly erred in finding the advances were equity. The Tax Court failed to consider several factors used by this court for determining whether advances are debt or equity, ignored relevant evidence, and drew several unsupported inferences from its factual findings. We reverse and find that the stockholder advances were bona fide debt.

Judge Rogers wrote a separate concurring opinion focused on the standard of review to be afforded to the Tax Court's decision:

I concur fully in the majority opinion. I write separately to explain why the legal, non-factual components of the tax court’s analysis are properly examined on appeal without deference to the tax court, notwithstanding the overall “clearly erroneous” standard that our court has stated to be applicable to the determination of whether a particular transaction is debt or equity.

Whether an issue to be determined by the courts is one of fact or law is sometimes pretty simple. But often, especially when the issue can be stated in the form of “Does the item before us fit within the legal definition of x?”, the factual-versus-legal nature of the issue can be perplexing. This is because the seemingly single question really has two different components: “What is the nature of this item?” and “What is the legal meaning of x?” In a case where there is total agreement between the parties as to the nature of the item, the question whether the item is an x is a legal one. In a case where there is total agreement between the parties as to the meaning of x, but a dispute as to the nature of the item, the issue of whether the item is an x is totally factual. Where there is some dispute on each of the two issues, the issue of whether the item is an x is a mixed question of law and fact.

Judge Moore dissented, arguing that the majority applied the wrong standard of review to the Tax Court's decision:

I respectfully dissent because I believe that the Tax Court’s conclusion that the shareholder advances to taxpayer were equity contributions rather than genuine debt is not clearly erroneous. Far from being left “with the definite and firm conviction that a mistake has been committed,” Holmes v. Comm’r, 184 F.3d 536, 543 (6th Cir. 1999) (internal quotation marks omitted), I believe that the record provides significant support for the Tax Court’s conclusion, and I would affirm....

In the particular circumstances of this case, which include the “contradictory, inconsistent, and unconvincing” testimony of the majority shareholder, I cannot conclude that it was clearly erroneous for the Tax Court to decide that the factors that favored equity were deserving of more weight than those that favored debt. Because I believe the record supports two permissible views.

(Hat Tip:  Howard Bashman.)

Symantec Faces $1 Billion IRS Tax Claim

Interesting article in today's Wall Street Journal, Symantec Bucks $1 Billion Tax Bill Sought by IRS, by Antione Boessenkool:

The $1 billion tax bill that may be coming due for Symantec Corp. is largely the result of a widely used corporate maneuver that can shift profits overseas and shelter income from U.S. taxes. The security-software company owes the money as a result of licenses granted to foreign units, according to IRS audits that were disclosed by the company Monday in a SEC filing. Symantec, based in Cupertino, Calif., disputes the IRS conclusion, and said it will fight to overturn it.

Symantec and other companies grant licenses for a fee to foreign subsidiaries, and those licenses generate profits overseas. The Symantec dispute is over whether the company got fair value -- and paid taxes for that value -- on the licenses it granted. The disputed Symantec licenses involve Irish subsidiaries of Symantec and Veritas Software Corp., which was acquired by Symantec last year.

Ireland's favorable economic conditions, including a low corporate tax rate, make it a fairly standard place for U.S.-based multinational companies to do business....While the U.S. has a corporate tax rate of 35%, Ireland's corporate tax is 12.5%....

For the Form 8-K filed with the SEC, see here.  For more media coverage, see:

• CompuerWorld.com
• MarketWatch.com
• MotleyFool.com

Shaviro on Consumption Taxes and Politics

Daniel N. Shaviro (NYU) has posted Simplifying Assumptions:  How Might the Politics of Consumption Tax Reform Affect (Impair) the End Product? on SSRN.  Here is the abstract:

One of the main advantages of consumption taxation that its advocates, including me, have claimed is simplification. However, the extent to which simplification actually would result from a major consumption-based tax reform would depend not only on the compliance and administrative issues raised by the structure of the hypothetical new system, but also by the politics of enactment. This paper, commissioned for a conference concerning consumption-based reform, asks the inevitably speculative question of how the politics of such a reform, if it occurred, would affect (or impair) the end product. The conclusions reached are not very optimistic.

Bloggership Conference Update

Two new developments about our symposium on Bloggership:  How Blogs Are Transforming Legal Scholarship to be held one week from today at Harvard Law School (Friday, April 28):

• Eugene Volokh is organizing a meet-the-bloggers social event on Thursday evening, April 28, at 9:00 p.m.  I hope those of you in the Boston area will stop by and say hello.  19 of the symposium particpants/bloggers will be there.
• For those of you unable to attend the conference, a live streaming audio cast will be available on the Barkman Center for Internet & Society web site.  (A permanent recording will be available on the web site in about a week after the event.)

Most-Cited and Most-Downloaded Minority Law Faculty

Paul Butler has published a list of the Most-Cited Minority Law Faculty from the Top 30+ Law Schools, derived from Brian Leiter's Faculty Quality Based on Scholarly Impact, 2005 Ranking.  The listing consists of the 43 minority law professors whose citation counts place them in the Top 25% of the faculty at these schools.

In our paper, Ranking Law Schools: Using SSRN to Measure Scholarly Performance, 81 Ind. L.J. 83 (2006), Bernie Black and I discuss citation count rankings of law faculties (at pages 92-95), and then compare those rankings (as well as rankings of law faculties by reputation and publications) with the SSRN rankings (at pages 97-102, 107-20).  Although our article focused on rankings of law faculties, we plan in future work to take on the question of rankings of individual law faculty (we briefly discuss individual faculty rankings in our respective corporate and tax law areas at pages 120-22).

Here are the SSRN rankings and measures for total downloads (as of April 1, 2006) of the most-cited minority law faculty from the Butler-Leiter list:

Faculty	Rank	Measure
Mitu Gulati (Georgetown)	44	7039
John Yoo (UC-Berkeley)	61	5870
Keith Hylton (Boston University)	76	5081
Bruce Kobayashi (George Mason)	112	3849
Neal Katyal (Georgetown)	219	1985
Saikrishna Prakash (San Diego)	293	1451
Jim Chen (Minnesota)	427	988
Daniel Rodriguez (San Diego)	447	947
Gabriel Chin (Arizona)	735	511
Adrienne Davis (North Carolina)	1108	289
Lan Cao (William & Mary)	1338	209
Sheila Foster (Fordham)	1769	118
Hiroshi Motomura (North Carolina)	2398	49
Alex Johnson (Minnesota)	2752	24

Only 14 of the 43 most-cited minority law professors are included in the SSRN rankings.  This ranking excludes minority faculty not on the Butler-Leiter list (e.g., Stephen Choi (NYU), who ranks #32 with 10066 downloads; Tim Wu (Columbia), #49 with 6844 downloads; and my colleague Rafael Gely (Cincinnati), #180 with 2492 downloads).  In our Indiana article, we discuss (at pages 116-17) the racial (and gender) implication of prior faculty ranking studies as well as the under-representation of minorities (and women) in the SSRN rankings.

NY Times Series: Wealth in CT, NJ, NY

David Cay Johnston has a fascinating series of articles in the New York Times that uses IRS data to track wealth (adjusted gross income and interest income) by zip code in Connecticut, New Jersey, and New York (Long Island and Westchester):

Wealth in Connecticut

• Article
• Graphic:  Map
• Graphic:  By Zip Code
  • Highest Average AGI:  $378,533 in 06831/Greenwich
  • Lowest Average AGI:  $3,226 in 06123/Hartford

Wealth in New Jersey

• Article
• Graphic:  Map
• Graphic:  By Zip Code
  • Highest Average AGI:  $566,541 in 07976/Morristown (New Vernon)
  • Lowest Average AGI:  $8,750 in 08625/Trenton

Wealth on Long Island, New York

• Article
• Graphic: Map
• Graphic: By Zip Code
  • Highest Average AGI:  $370,670 in 11765/Mill Neck
  • Lowest Average AGI:  $12,464 in 11802/Hicksville

Wealth in Westchester, New York

• Article
• Graphic:  Map
• Graphic:  By Zip Code
  • Highest Average AGI:  $487,737 in 10577/Purchase
  • Lowest Average AGI:  $13,616 in 10545/Maryknoll

IRS Web Site Traffic Stats

After bragging yesterday about TaxProf Blog's recent traffic surge, the IRS's release of its traffic stats (IR-2006-66) put me in my place:  On April 17, there were 3,385,936 visits to the IRS web site, peaking at 3,237 hits per second at 12:30 p.m.   From the Information Release:

The IRS Web site is one of the most heavily used sites on the Internet during the tax filing season. This week’s record usage follows a redesign of the Web site last fall that enhanced search capabilities and provided easier access to tools that help taxpayers and tax professionals. The American Customer Satisfaction Index level for the Web site has also increased this year.

Florida Bar Association Tax Section Annual Meeting

The 2-day Florida Bar Association Tax Section Annual Meeting and Educational Institute kicks off today at the Renaissance Vinoy Resort and Golf Club in St. Petersburg, FL.

Joint Economic Committee Releases Mutual Fund Shareholders' Taxes Jump

The Joint Economic Committee yesterday released Mutual Fund Shareholders' Taxes Jump:

A surge in capital gain distributions in 2005 contributed to a large increase in taxes paid by mutual fund shareholders in the most recent filing season, Chairman Jim Saxton said today. Saxton based his remarks about this growing tax burden on a new study released by the respected Lipper research organization. According to the Lipper study, long-term capital gain distributions made by mutual funds surged 152 percent from 2004 to 2005.

Slemrod Presents Taxation and Big Brother: Information, Personalization, and Privacy in 21st Century Tax Policy Today at UCLA

Joel Slemrod (University of Michigan, Ross School of Business) presents Taxation and Big Brother: Information, Personalization, and Privacy in 21st Century Tax Policy at UCLA today as part of its Tax Policy and Public Finance Workshop Series, moderated by Eric Zolt & Victor Fleischer.  Here is the abstract:

The transmission and processing of information is at the core of taxation, and one of the great ongoing technological resolutions has been in information technology. Looking forward ten, twenty, or thirty years, what are the implications of technological advancements for tax policy? How will, and how should, tax policy be different twenty years from now than it is today? This paper argues that, although the new technology greatly facilitates the use of taxpayer information to create a personalized tax system, there are forces pushing the tax system in the opposite direction, toward a radically depersonalized tax system, partly out of concern over the infringement on privacy of the information.

The colloquium takes place in Room 2448, UCLA Law School, 4:00 - 6:00 p.m. PST.

More on Cheney's Tax Return

Michael S. Kirsch (Notre Dame), whose Monday's post on Cheney Tax Return Shows Katrina Tax Benefits for Non-Katrina Charitable Contributions attracted a great deal of attention in the blogosphere (noted here), has some follow-up comments:

I think it's important to keep this whole issue in perspective. I don't think it represents any wrongdoing (either legal or ethical) by the Vice President. Under the VP's 2001 gift administration agreement, all of the income from his Halliburton options was irrevocably set aside to pay (i) taxes on that income, and (ii) gifts to the charities (as well as administrative costs of implementing the agreement). In effect, the Katrina tax legislation (and some heads-up tax planning by the VPs advisors) had the net effect that more of the stock option proceeds went to the charities and less (i.e., zero) went to pay taxes. It didn't result in any extra personal financial benefit to the VP.

I think the main point of these events is to shine light on the ad hoc way that Congress goes about changing the tax code. Instead of enacting the short-term changes to the charitable giving rules (which expired on 12/31/05), Congress should decide on the proper way to handle charitable contributions and then stick with it (in that regard, I think many people would argue that the approach of the Katrina legislation -- which removed the arbitrary limits on the amount of charitable contributions that can be deducted in any one year -- should become the permanent rule).

Liebman Presents Return-Free Filing for the U.S Today at NYU

Jeffrey B. Liebman (Harvard University, Kennedy School of Government) presents Should Independent Taxation Be a Barrier to Return-Free Filing for the U.S.? at NYU today as part of its Colloquium on Tax Policy and Public Finance series conducted Alan Auerbach and Daniel Shaviro.

The Colloquium will be held in Room 120 of Furman Hall from 4:00 - 6:00 p.m. EST. Although the public is invited to attend, due to heightened security throughout NYU Law, please contact Rosemary Simon so she can provide the Guard's desk with your name.

Death of Dan Posin

I am sorry to bring you the new of the death of Daniel Q. Posin, Judge René H. Himel Professor of Law at Tulane.  I am reprinting (with permission) an email sent today to the Tulane community by Dean Lawrence Ponoroff:

I received a call this morning to let me know that Dan Posin slipped into a coma last night and, shortly thereafter, peacefully passed away. He was with his family and close friends at the end. Arrangements for a service have not yet been finalized, but it is likely to happen on Saturday. I will let you know as soon as I have further information. I know you all join me in extending our deepest sympathies to Dan’s family. It is a terrible loss.

Here is Dan's bio from the Tulane web site:

Daniel Q. Posin is the Judge René H. Himel Professor of Law. His areas of scholarship and teaching are corporate law, alternative dispute resolution of business problems, and tax law. He is the author of Corporate Tax Planning: Takeovers Leveraged Buyouts and Restructurings, and the co-author of The Hornbook on Federal Income Taxation, 6th edition. Professor Posin has served as Special Counsel to the Corporate and Securities Section of the leading New Orleans law firm of Jones Walker. He also regularly mediates business and commercial disputes. Professor Posin is an arbitrator with the National Association of Securities Dealers, where he has served as a panel chair. He is also an arbitrator with the American Arbitration Association.

I will provide more details as they become available.

Tax Court: Couple Must Report as Income $25k Paid by Wife's Paramour

The Tax Court yesterday decided an interesting gift v. income case, Peebles v. Commissioner, T.C. Summ. Op. 2006-61 (4/19/06).  You don't often find facts like these in a tax case:

Petitioners are married and lived in DeWitt, Arkansas, when they filed the petition....In 1999, Milton D. Peebles (petitioner) was a police officer in DeWitt. Mrs. Peebles was a patient of Dr. John M. Hestir (Dr. Hestir), who had a medical practice in DeWitt. Petitioner discovered in October 1999 that Dr. Hestir and Mrs. Peebles were having an affair.

Petitioner then lured Dr. Hestir to petitioners’ home on the pretext that Mrs. Peebles needed medical care. Petitioner is about 20 years younger than Dr. Hestir and is capable of being loud and garrulous when angry....Petitioner was angry when Dr. Hestir arrived. At that time, petitioner confronted him with the evidence of the affair and threatened to sue him for $150,000....Dr. Hestir told petitioner that he did not have $150,000,but he did have $25,000. They agreed to meet 2 days later so that Dr. Hestir could pay that amount to petitioner....

Petitioner and Dr. Hestir met in the parking lot of DeWitt Bank & Trust, and Dr. Hestir gave petitioner $25,000 in cash. During the exchange, petitioner and Dr. Hestir had a conversation which petitioner taped. Dr. Hestir said he was sorry about the affair and stated that this was “free money”, but that petitioner should be careful how he spent it because it could be considered income.

Dr. Hestir was right -- the Tax Court concluded that the $25,000 was income and not a gift:

On February 8, 2000, Dr. Hestir’s accountant prepared a Form 1099-MISC, Miscellaneous Income, reporting that he had paid $25,000 to petitioner. Petitioners did not report the $25,000 on their timely filed Federal income tax return for 1999....

Petitioners contend that the $25,000 payment was a gift because it was Dr. Hestir’s idea to pay it, and petitioner did not force him to pay it....

We believe that Dr. Hestir thought petitioner wanted a payment because of the affair. We also believe that Dr. Hestir offered the payment not because of detached generosity, but rather as a way to close the matter and avoid being sued by petitioner....

Petitioners contend that Dr. Hestir paid the $25,000 out of a feeling of guilt or moral obligation. Petitioners point out that a newspaper article states that Dr. Hestir said he paid petitioner, ended the affair, and reported himself to the medical board because of his guilty conscience. A payment made because of the constraining force of moral or legal duty is not a gift.

Dr. Hestir’s accountant filed the Form 1099-MISC a few days after the medical board hearing. Petitioners contend that Dr. Hestir did that to punish petitioner for reporting the matter to the medical board and to incorrectly make it appear that the $25,000 payment was not a gift. We disagree; the payment was not actually a gift.

We conclude that the $25,000 payment by Dr. Hestir was not the result of detached and disinterested generosity or paid out of affection, respect, admiration, or charity. Instead it was paid to avoid a lawsuit, to avoid public and professional embarrassment, and to assuage his own feelings of guilt or moral obligation. Therefore, the $25,000 payment in 1999 is not a gift and is includable in petitioners’ gross income for that year.

District Court: Hastings Can Refuse to Recognize Christian Legal Society Student Group

The U.S. District Court for the Northern District of California ruled on Monday in Christian Legal Society v. Kane, No. C 04-04484 JSW (N.D. Cal. 4/17/07), that Hastings College of Law can deny student-activities funds and official recognition to a Christian Legal Society student group on the ground that the group's refusal to allow gay and lesbian members and officers violates the school's antidiscrimination policies.

Press reports:

• Chronicle of Higher Education
• San Francisco Chronicle
• San Jose Mercury News

Graetz & Warren on Income Tax Discrimination and the Political and Economic Integration of Europe

Michael Graetz (Yale) (left) & Alvin C. Warren (Harvard) (right)have published Income Tax Discrimination and the Political and Economic Integration of Europe, 115 Yale L.J. 1186 (2006).  Here is the abstract:

In recent years, the European Court of Justice (ECJ) has invalidated many income tax law provisions of EU member states as violating the guarantees of the European constitutional treaties of freedom of movement for goods, services, persons, and capital. These decisions have not, however, been matched by significant European income tax legislation, because no European political institution has the power to enact such legislation without unanimous consent from the member states. Under the treaties, the member states have retained a veto power over income tax legislation. In this Article, we describe how the developing ECJ jurisprudence threatens the ability of member states to use tax incentives to stimulate their domestic economies and to resolve problems of international double taxation. We conclude that the ECJ approach is ultimately incoherent because it constitutes an impossible quest - in the absence of harmonized income tax bases and rates throughout Europe - to eliminate discrimination based on both origin and destination of economic activity. We also compare the ECJ’s jurisprudence with the resolution of related issues in the U.S. taxation of interstate commerce and international taxation. Finally, we consider the potential responses of both the European Union and the United States to these developments.

Atax Conference on International Tax Administration

The Australian Taxation Studies Program (Atax), University of New South Wales, kicks off the 2-day 7th International Tax Administration Conference:

This conference brings together academics, practitioners and officers of revenue authorities from around the world to discuss and compare contemporary issues and research in tax administration.

For more information, see:

• Flyer
• Program

More on Houston Dean Rapoport's Resignation

Following up on Tuesday's post, Houston Dean Rapoport Resigns Following Flap Over Drop in U.S. News Rankings:  Inside Higher Ed has published Resigned Over Rankings, by Rob Capriccioso:

In 2002, the University of Houston Law Center was ranked 50th in the U.S. News & World Report annual law school rankings.

Today, it’s ranked number 70.

Some faculty members and students at the institution believe that the downward slide may have been the cause of Monday’s resignation of Nancy Rapoport, the center’s dean since 2000. Others say that notion — and the rankings themselves — are phooey.

“After six years as dean, I don’t think this is a really big deal,” says Michael A. Olivas, a law professor at Houston and director of the Institute for Higher Education Law and Governance at the school. “There is a shelf life for deans, you know. These rankings are definitely not how I measure the success of a dean.”

But, according to students who attended a faculty member meeting last week, some professors directly criticized the dean for the drop. While the U.S. News rankings are regularly derided by educators as poor measures of quality, many of those same educators worry about how their institutions fare....

One professor, who wished to remain anonymous, said that faculty members and student groups had been meeting regularly since the most recent rankings came out to discuss what could be done to boost them. The professor indicated that none of these meetings involved the dean.

Disclosure:  I am a big fan of Dean Rapoport, as she gave one of the best talks at our symposium last year on The Next Generation of Law School Rankings and published a particularly thoughtful paper, Eating Our Cake and Having It, Too: Why Real Change is so Difficult in Law Schools, 81 Ind. L.J. 359 (2006).  In light of the recent events, I was struck in re-reading her concluding words:

An administrator who has the best interests of her school at heart can’t afford the folly of taking things personally or of retaliating when people oppose her ideas.

What I’ve learned as part of Magellan [Houston's strategic plan], though, is that not all of my colleagues operate under the same constraints. The debates in Magellan have involved matters of deeply held principles, and there has been real heat in our discussions. In fact, on more than one occasion, one committee member’s passionate advocacy of his position took on the appearance of a personal attack....The point is that, out of honest disagreement or just pure cussedness, a faculty member can resist change and even rally his colleagues to resist change. Sometimes, that resistance is healthy for the institution. Not all change is good. But only time will tell whether resistance at a particular point in a school’s history was good or bad for the school.

Turmoil in Oregon Dean Search

The University of Oregon student newspaper has an interesting article on the turmoil surrounding the law school's dean search:  Controversy Besets Dean Search:

Two University Law School faculty members are preparing to take unexpected leaves of absence next year as a result of the University’s fruitless search for a new Law School dean, interim Law School dean Margie Paris told law students and faculty at a townhall-style meeting Monday. Law professors Keith Aoki and Steven Bender are planning to take sabbaticals to “ponder where to take our work where it is appreciated as we heal from these latest wounds to friends,” Bender wrote in an e-mail circulated among University employees. Paris said they both plan on returning after no more than a year away.

Controversy has embroiled the Law School faculty after the University failed to hire Kevin Johnson, the current associate dean for academic affairs at the University of California-Davis. Johnson withdrew from the search after the two other candidates accepted offers elsewhere....

Faculty at the Law School say Johnson was treated differently than the other candidates and question if race played a role in the University’s decision, while University administrators have remained relatively tight-lipped on the issue, saying only that the search process is complex, had nothing to do with race and that they were very disappointed with its outcome.

The University began its search for a new dean in April 2005 and named three finalists early in the 2005-06 school year — Hiram Chodosh, currently the associate dean for academic affairs at Case Western Reserve University’s School of Law , Gail Agrawal, currently the interim dean of the University of North Carolina Law School, and Johnson.

The University first offered the post to Agrawal on January 19, but she accepted an offer at the University of Kansas. The University then asked Chodosh on February 13, but he accepted an offer at the University of Utah.

Paris said the Law School faculty expected an offer to be made to Johnson after the first two candidates accepted offers elsewhere, but instead of a job offer, the University called Johnson back for further interviews, unlike the other candidates.

(Hat Tip:  JD2B.)

Disclosure:  Kevin Johnson is co-editor of our ImmigrationProf Blog.

Update:

• Interim Dean Margaret L. “Margie” Paris has been given a two-year appointment (through June 30, 2008) to serve as Dean (see Oregon press release)
• The student newspaper published an editorial today, UO Should Explain Truth Behind Law Dean Fiasco:

The search for a new Law School dean is proving to be a time-consuming and embarrassing task for the University. Although three candidates were chosen early this school year, two of those finalists declined the position in lieu of offers from other U.S. colleges. Kevin Johnson, associate dean for academic affairs at the University of California-Davis, then became the sole candidate, but the University did not immediately extend him an offer. Administrators asked him to return for further interviews, which has stirred up allegations of racist hiring practices because Johnson is Latino....

Administrators have stated that race did not play a part in the dean search process, but they have yet to publicly offer an explanation for why Johnson was the only one of the three finalists asked to undergo follow-up interviews....

The oddity of the search continued when the University eventually extended an offer to Johnson only after he had already withdrawn from the search. Johnson himself has not cleared up what went wrong, but he has told the Emerald that he is “glad that chapter in my life is behind me.”

The Kirsch Effect

Michael Kirsch's post on Monday, Cheney Tax Return Shows Katrina Tax Benefits for Non-Katrina Charitable Contributions, has spawned a great deal of attention in the blogosphere.  Here is how the post has moved the traffic needle on TaxProf Blog:

The post has generated more comments (133) than any of the other 4,800 posts on TaxProf Blog since its inception.

Tax Court Disallows Business Expense Deductions Claimed by Lehigh Prof

In Kanofsky v. Commissioner, T.C. Memo. 2006-79 (4/18/06), the Tax Court sustained the Service's disallowance of business deductions claimed by Alvin S. Kanofsky, a full-time physics professor at Lehigh University:

For each year in issue, petitioner filed a Form 1040, U.S. Individual Income Tax Return, showing zero taxable income and no tax due. On a Schedule C attached to each of those returns, petitioner listed as his principal business or profession "research and development" and as the name of his business "A.S.K. Enterprises". Only the 1999 and 2000 Schedules C listed a business address, which was 30 E. 3d St., Bethlehem, PA 18015 (the Bethlehem property). All of the Schedules C report zero gross receipts and zero gross income, and they report the following amounts of total expenses (and resulting losses):

      Year           Schedule C Expenses          
      1996                   $72,786
      1997                    75,388
      1998                    80,675
      1999                    85,845
      2000                    80,020

Neither petitioner's exhibits nor his testimony is sufficient to establish that he was engaged in a trade or business during the 1996- 98 period. Moreover, petitioner's 1996 98 Schedules C reporting zero gross receipts from A.S.K. Enterprises support a finding that he was not engaged in any trade or business during that period....

Petitioner's evidence of business use for his three properties is no more convincing for 1999 and 2000 than it is for 1996-98.

DOJ Indicts Former U.S. Attorney Currin for Tax Fraud

The Department of Justice has indicted former U.S. Attorney Sam Currin for tax fraud involving offshore trust arrangements.  From the News & Observer:

A protege of former U.S. Sen. Jesse Helms, Currin is a former U.S. attorney for Raleigh and the Eastern District of North Carolina. He also has been a Superior Court judge and state Republican Party chairman. The charges Currin faces carry maximum punishments totaling 60 years in prison.

The indictment, unsealed Tuesday, alleges that Currin and two co-defendants concocted arrangements so that wealthy U.S. citizens could evade federal income taxes. Currin and the two co-defendants also are accused of preparing fraudulent documents to deceive the IRS....

Currin and Graves had their initial appearances Tuesday at the federal courthouse in Raleigh. Currin's wife, a former dean of Campbell University's law school, sat in the front row. Neither of the Currins would talk after court.

Cords on Tax Protestors and Penalties

Danshera Cords (Capital) has published Tax Protestors and Penalties: Ensuring Perceived Fairness and Mitigating Systemic Costs, 2005 BYU L. Rev. 1515.  Here is the Conclusion:

Voluntary compliance is essential to the efficient and effective collection of revenue by any government. Allowing certain members of the society to avoid their obligation to contribute to the government, simply because they engage in dilatory tactics, is not an acceptable option. If some succeed, and their success is known, others may be encouraged to engage in the same behavior. Moreover, it is unfair that the majority bear the costs to the system resulting from tax protestors' use of frivolous positions.

Tax protestors cannot be shut out of the system entirely because others might then fear that they too would be excluded. Tax protestors will, on occasion, raise valid complaints. Shutting protestors out of the tax dispute systems would diminish the perception of fairness of the system. Because fairness of the system is an essential component to voluntary tax compliance, it should be encouraged, even at a cost. On the other hand, it is unfair to impose the costs of frivolous positions on those who comply.

The current penalty provisions do not adequately deter tax protestor behavior and tax protestors cannot be shut out of either the administrative or judicial system; therefore, additional penalties must be imposed. Tax protestors impose costs at the administrative level when they demand that the IRS and its employees prove to them that income taxes are constitutional, legally enforceable obligations. These costs are exacerbated when the tax protestor seeks review of the liability, either before payment by petitioning the Tax Court, or after payment, which may have occurred through seizure or mandatory withholding, in the district courts. Judicial review expends administrative resources defending the Service's determinations and collection actions and judicial resources in addressing motions and trying cases. The costs that may be incurred in pursuing collection and defending tax deficiency determinations and collection decisions have been increased with the adoption of CDP rights. Imposing nondiscretionary penalties on frivolous arguments will protect the system from both the concerns that some will be shut out of the system and that others will have to bear the cost of the frivolous arguments. The amount of the penalty should be the amount of the costs incurred by the Service and the courts to collect the taxes, interest and other penalties owed.

Conglomerate to Host Second Annual Junior Scholars Workshop

The good folks at Conglomerate have announced their Second Annual Junior Scholars Workshop for untenured law professors or candidates entering the law teaching market this fall. T hey have issued both a Cal for Papers and a Call for Commentators:

Call for Papers: If you are sending out a scholarly article this fall on a topic that may be interesting to Conglomerate’s readers – such as corporate law, securities, contracts, business tax, finance, antitrust or law and economics – we would like to link to your paper and provide a forum for you to receive feedback on your paper before you publish it or present it at a job talk. We may also consider articles accepted for publication if the paper has not reached the final editing stage. We know that many new faculty members do not have the opportunity to present papers at national conferences and find it challenging to get others to read their work. Hopefully, this workshop will facilitate that process....

Call for Commentators: If you are a reader and would like to be a commentator for one of the papers presented, please let me know that as well. If you were a presenter in last year's workshop, then you may feel moved to repay the benefits you received by stepping into that role this year....

The Second Annual Junior Scholars Workshop will begin June 5, 2006. We will host one paper each week, with the paper and solicited comments posted each Monday afternoon.

Two tax papers were featured in last year's workshop:

• Brian Galle (Florida State), A Republic of the Mind: Cognitive Biases, Fiscal Federalism, and Section 164 of the Tax Code
• Ruth Mason (NYU), U.S. Tax Treaty Policy and the European Court of Justice

w.ss

L.A. Times on CSI: PowerPoint

There is a fascinating article in today's L.A. Times for those of us who have sat through mind-numbingly boring PowerPoint presentation in faculty colloquia and job talks:   Making a (Power)Point of Not Being Tiresome, by Claire Hoffman:

PowerPoint is:

• Bullet Points
• A Mysterious Jumble of Graphs and Charts
• Utter Boredom

But Cliff Atkinson, who runs a one-man, Los Angeles-based company called Sociable Media, wants to change all that. Atkinson published a book last year called Beyond Bullet Point about how to combat "PowerPoint fatigue": the deadening sameness of Microsoft Corp.'s commonly used presentation software. The book caught the eye of W. Mark Lanier, a Houston-based trial lawyer

What happened next sounds like an episode of a ripped-from-the-headlines TV crime drama. Lanier, who was suing Merck & Co. on behalf of a man who died while taking the painkiller Vioxx, hired Atkinson as a consultant to help with his opening argument. The resulting 253-slide presentation was so mold-breaking — so the opposite of boring — that it was dubbed "CSI: PowerPoint." Reporters covering the trial singled out the slides, with one calling them "frighteningly powerful." Jurors apparently agreed: They awarded the plaintiff's family $253 million, coincidentally $1 million per slide. (Merck is appealing that award.)

Check out Atkinson's 5 Ways to Reduce PPT Overload.  (Hat Tip:  Ellen Aprill.)

Goodwin on The French Fry Tax

Interesting post by Michele Goodwin (DePaul) on blackprof.com, Forget Cheeseburger Lawsuits--Try The French Fry Tax:

A French fry tax, either a tax on the industry profiting from its contribution to the national health crisis, or a tax on the consumer who can go to the local market and buy a small bag of chips for twenty-five cents, while the healthier orange may cost fifty cents. The tax revenue generated could go directly into increasing existing public health coverage.

While it can be argued that this potato chip tax is paternalistic, might financially burden economically distressed communities, and government intervention where the government does not belong, this option is one possible answer to the question about resources to fund health care interventions. The precedent for this type of public policy and taxation has already been established with the cigarette tax. Why not expand it?

Public health impacts us all. The human, economic, and social tolls in African American communities are too great to ignore. Imagine if the French fry tax could do what the cigarette tax has already done—consumption might decrease, public health awareness would increase, and the revenues generated could expand coverage to the 45.5 million Americans who are presently without.

For more on such taxes, see:

• Strnad on Conceptualizing the "Fat Tax": The Role of Food Taxes in Developed Economies (11/13/05)
• Tax Foundation Weighs in Against "Fat Tax" (7/17/05)
• Fat Tax: The California Strategy (4/22/05)
• Pratt Notes Scholarly Meat Behind "Fat Tax" Idea (6/9/04)
• The Fat Tax (6/8/04)

UNC Dean Candidate Podcasts

In what may be a first, the North Carolina dean search committee has released MP3 files of the job talks made by the three dean candidates to have made campus visits thus far:

• UNC Professor Jack Boger (Campus Visit: April 10-11)
• UC-Davis Dean Rex Perschbacher (Campus Visit: April 12-13)
• Alabama Dean Kenneth Randall (Campus Visit: April 17-18)

The fourth candidate, Boston University Interim Dean Maureen O'Rourke, will visit UNC on May 1-2.

The committee explained the state of the search:

The committee consulted with the law school faculty and staff after Professor Erwin Chemerinsky and Teresa Roseborough withdrew as candidates in early March. Professor Davison Douglas (William & Mary) remains a viable candidate, but we decided to consider other strong candidates who also might be available and interested. The committee received more than 40 nominations -- most had not been nominated in the first round of the search. Each person was contacted and the committee conducted telephone interviews with eight candidates. The following four people emerged as the strongest candidates going forward.

New Leiter Student Quality Rankings: Biggest Winners and Losers

Brian Leiter has published new 2006 Rankings of Law Schools by Student Quality, which ranks the Top 40 schools (47 with ties) by the 75th percentile LSAT (the top quarter) for the class that entered in fall 2005.

Joe Hodnicki of our sister Law Librarian Blog has identified the biggest moves from the 2005 Rankings, which I have expanded here to include all the schools in the 2005 and 2006 rankings:

Biggest Increase in Student Quality (75th Percentile LSAT): 2006 v. 2005:

• +13 Illinois (20 in 2006, 33 in 2005)
• +6 Minnesota (18, 24)
• +6 Vanderbilt (20, 26)
• +6 Wake Forest (29, 35)
• +4 Boston University (27, 31)
• +3 Chicago (5, 8)
• +3 Washington-St. Louis (18, 21)
• Baylor (35, unranked)
• Florida (40, unranked)
• Maryland (40, unranked)
• Ohio State (40, unranked)

Biggest Decrease in Student Quality (75th Percentile LSAT): 2006 v. 2005:

• -7 Washington-Seattle (34 in 2006, 27 in 2005)
• -6 Hastings (36, 30)
• -3 Notre Dame (23, 20)
• -3 Washington & Lee (24, 21)
• -3 George Washington (25, 22)
• -3 Cardozo (26, 23)
• -3 Boston College (27, 24)
• Loyola-L.A. (unranked, 36)
• Colorado (unranked, 45)
• Connecticut (unranked, 45)
• Tulane (unranked, 48)
• Iowa (unranked, 49)
• Temple (unranked, 49)

Aprill on Effect of Moloney on Public Interest Loan Forgiveness Programs

Tax Prof and Associate Dean Ellen P. Aprill (Loyola-L.A.) offers some thoughts on the Tax Court case we blogged yesterday, Moloney v. Commissioner, T.C. Summ. Op. 2006-53 (4/17/06), which held that a law school graduate working in a public interest job must report income on the receipt of funds to help repay her student loans:

Section 108(f) of the Internal Revenue Code specifies that, contrary to the general rule, forgiveness of a student loan is not income if the forgiveness is made as part of a plan to encourage students to serve areas with unmet needs for a period of time. The code further states that "student loan" includes a loan made by an educational institution to refinance a loan, if the refinancing is part of a plan of the institution to encourage students to undertake such service.

Yesterday, the Tax Court decided a case, Moloney v. Commissioner, in which it concluded that a grant from a governmental program made by means of a dual-payee check to a law school graduate and to her lender to be used to repay her student loans could not constitute refinancing under section 108(f) and thus did constitute taxable income to the individual. My understanding from speaking to the Director of our Public Interest Department is that some law schools, not wishing or having the infrastructure to become lenders, have set up their public interest loan forgiveness program using such dual-payee checks. Although the Tax Court case is in a special category of cases for small claims that may not be treated as precedent for any other case (and which cannot be appealed), any school that has structured its public interest loan program in this way may wish to consider restructuring it or seeking a legislative solution.

GAO Releases IRS's Appeals' Feedback Project

The Government Accountability Office yesterday released Tax Administration: Opportunities to Improve Compliance Decisions and Service to Taxpayers through Enhancements to Appeals' Feedback Project (GAO-06-396) (4/18/06).  See also the 1-page Highlights, which contains this neat chart of the IRS's appeals system: 

 

IRS Attorney Directory by Code Section & Subject Matter

The monthly update of the 118-page directory of attorneys in the IRS Chief Counsel's Office, arranged by Internal Revenue Code Section and Subject Matter, for April 2006, is available on the Tax Analysts' web site.