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Wednesday, April 20, 2011

Subotnik: Why All Students in the Basic Tax Course Should Prepare a Return

Dan Subotnik (Touro College), The Forest and the Trees−An Argument for Training Students in Tax Return Preparation, The Law Teacher, Spring 2011, at 10:

Many years back, I got a phone call from the mother of a student. Right at the outset, she began scolding me because her daughter, after taking my income tax course, was unable to prepare the family’s income tax return. Mom saw no reason why senior family members should have to use a tax preparation service; the family was, she insisted, of only modest means, particularly after paying the daughter’s tuition. What was it that I was doing in class, she wanted to know. The only defense that came to mind was that I had higher ambitions for my class than tax return preparation and that “teaching to the forms” was (and is) not common practice in tax law teaching. Quickly realizing the spuriousness of my response— long before the MacCrate Report was emphasizing the importance of skills training—and determined to avoid tensions with future students’ mothers, I have made it a practice ever since to require completion of an income tax return.

I believe I know why tax teachers have ignored the tax return in legal education. A tax return is required of all Americans, not just lawyers. It seems that many law professors, moreover, think that we are a breed above our business school brethren (in which class I must also count myself, having taught in both law and business schools). They are the number crunchers, we are the theoreticians. Tax returns are just not within our jurisdiction. ...

The distinction between the training of tax lawyers and tax accountants, however, is, in an important respect, an unrealistic one. Whatever accountants need to know for successful practice, lawyers must be able to see the forest, the big picture, even if only rarely do we prepare income tax returns, our own included. Tax law students simply cannot have a holistic view of the system if they learn by taking one tree at a time as we do now: what is income?; when can you deduct an outlay?; how do you combine capital gains and losses, short term and long term?; and so on. They need to see how all the pieces of the system fit together.

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Comments

Yes, students should actually see and work through a couple forms. You need to see how what happens on one schedule can completely frustrate the tax planning elsewhere on the return (e.g. the AMT in action!)
The most glaring weakness in my personal law school experience was that in three years, including every tax and business class in the catalog, we only crunched a number in one in-class example. One estate tax marital deduction. That was it. It wasn't until I got out into the tax department of a Big 8 Firm that I learned how it really worked.

It should be noted that the "business schools" are having the same problem. For 8 years I've taught in the MST program of a state university. With the advent of the "150 Hour" requirement for CPAs, we have a major influx of 5th year seniors taking Masters tax classes who have never even prepared their own 1040 on Turbotax Free File.

Posted by: Doug | Apr 20, 2011 7:27:39 AM

Concur. For example, a creative approach to teaching income tax could base the syllabus on Form 1040.

Posted by: Jake | Apr 20, 2011 8:24:47 AM

I'm in complete agreement with both Doug and Professor Subotnik. I understand that law schools do not train tax accountants, but it's difficult (if not impossible) to give legal advice regarding tax issues if you can't see how the various forms work in concert. I hope that this creates a shift towards going a little deeper than just reviewing Gregory v. Helvering.

Posted by: ry | Apr 20, 2011 10:11:30 AM

The parents were right. Heck, a three week H&R Block tax course probably teaches more tax than the student received in that college class.

As my personal example, I hired two employees who had completed their Master's in Taxation at a large university. When I asked them to prepare some simple tax returns, they had no clue. Then, when I was discussing a tax return with a client and one of them started spouting off all sorts of academic gobbledygook that added nothing and annoyed the client.

You have the same problem of tax ignorance with many attorneys, who still deal with all sorts of financial issues in divorces, business dissolutions, mergers, etc., but they don't understand taxes at all. How can that be?!

There's too much esoteric teaching of taxes in colleges with practical applications ignored. I suspect that the main reason is that most business and law professors have no idea how to prepare returns themselves. That needs to change.

Posted by: Woody | Apr 20, 2011 2:30:27 PM

As a tax accountant myself, I cringe when one of my clients has an attorney do their incorporation. Most often, they do not select the proper entity type, and when incorporating most often neglect the S-corporation election, when applicable. They give advice that we often have to undo because it is unworkable and detrimental from a tax perspective.

Posted by: Linda | Apr 21, 2011 4:56:27 AM

On the upside for CPA partners; our office welcomes the new tax client who has attempted to use the tax advise given by these attorneys. Our office appreciates those billable hours.

Posted by: donnal | Apr 21, 2011 6:08:39 AM