TaxProf Blog

Editor: Paul L. Caron
Pepperdine University School of Law

A Member of the Law Professor Blogs Network

Friday, December 21, 2012

Blank & Staudt: Corporate Shams

Joshua D. Blank (NYU) & Nancy C. Staudt (USC), Corporate Shams, 87 N.Y.U. L. Rev. 1641 (2012):

Many people—perhaps most—want to make money and lower their taxes, but few want to unabashedly break the law. These twin desires have led to a range of strategies, such as the use of “paper corporations” and offshore tax havens, that produce sizable profits with minimal costs. The most successful and ingenious plans do not involve shady deals with corrupt third parties, but strictly adhere to the letter of the law. Yet the technically legal nature of the schemes has not deterred government lawyers from challenging them in court as “nothing more than good old-fashioned fraud.”

In this Article, we focus on government challenges to corporate financial plans—often labeled “corporate shams”—in an effort to understand how and why courts draw the line between legal and fraudulent behavior. The scholars and commentators who have investigated this question nearly all agree: Judicial decision making in this area of the law is erratic and unpredictable. We build on the extant literature with the help of a new, large dataset, and uncover important and heretofore unobserved trends. We find that courts have not produced a confusing morass of outcomes (as some have argued), but instead have generated more than a century of opinions that collectively highlight the point at which ostensibly legal planning shades into abuse and fraud. We then show how both government and corporate attorneys can exploit our empirical results and explore how these results bolster many of the normative views set forth by the scholarly and policymaking communities.

http://taxprof.typepad.com/taxprof_blog/2012/12/blank-staudt-.html

Scholarship, Tax | Permalink

TrackBack URL for this entry:

http://www.typepad.com/services/trackback/6a00d8341c4eab53ef017ee6705794970d

Listed below are links to weblogs that reference Blank & Staudt: Corporate Shams:

Comments

I was almost tempted to read this article until the "N" word appeared near the end of the abstract. I refuse on principle to read any article where the authors use the word normative.

Posted by: John | Dec 22, 2012 1:24:28 AM