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Tuesday, September 2, 2014

WSJ: IRS to Tax Free Employee Meals in Silicon Valley

Wall Street Journal:  Silicon Valley Cafeterias Whet Appetite of IRS; Free, Employer-Provided Meals Are Viewed as a Taxable Fringe Benefit, by Mark Maremont:

TwitterThere is a grumpy new face in line at Silicon Valley's lavish freebie cafeterias: the Internal Revenue Service.

Staffers at technology companies such as Google, Facebook and Twitter long have enjoyed free gourmet meals, courtesy of their employers. The groaning buffets, in-house pizza joints, and kitchens stocked with organic produce are an intrinsic part of the culture in much of Silicon Valley, encouraging both collaboration and longer work hours.

The IRS, arguing that these freebies are a taxable fringe benefit, has given new attention to the issue in recent months during routine audits of some companies, tax lawyers said. When employers haven't been withholding taxes related to the meals, the IRS increasingly has sought back taxes that can amount to 30% of the meals' fair-market value, the lawyers said. ...

In another sign of a new focus on the issue, the IRS and U.S. Treasury Department last week included taxation of "employer-provided meals" in their annual list of top tax priorities for the fiscal year ending next June. The agencies said they intend to issue new "guidance" on the matter, but gave no specifics about timing or what the guidance would say.

Tax lawyers expect some employers will fight the IRS over the matter, and said the issue is likely to be decided in the courts. Any broad IRS crackdown could spur complaints about petty government interference with the culture of a crucial industry. But allowing free meals to go untaxed, critics say, distorts the economy and gives some employers an unfair edge. ...

IRS interest in the free-meals issue ticked up last year, after The Wall Street Journal published an article focusing on whether the food should be considered a taxable benefit. ...

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September 2, 2014 in Tax | Permalink | Comments (0)

Symposium: Teaching Trusts & Estates

T&ESymposium, Teaching Trusts and Estates, 58 St. Louis U. L.J. 643-846 (2014):

September 2, 2014 in Legal Education, Scholarship, Tax, Teaching | Permalink | Comments (0)

The Top 10 Law Schools for Hispanic Students

HispanicHispanic Business Magazine has published its annual ranking of the Top 10 Law Schools for Hispanics:

  1. Florida International
  2. Florida State
  3. Miami
  4. American
  5. Nova
  6. Texas
  7. USC
  8. San Francisco
  9. UCLA
  10. New Mexico

(Hat Tip: Francine Lipman.)

September 2, 2014 in Law School Rankings, Legal Education | Permalink | Comments (2)

Businesses Are Winning Cat-and-Mouse Tax Game: 'Self-Help Tax Reform'

New York Times Deal Book:  Businesses Are Winning Cat-and-Mouse Tax Game, by David Gelles:

NY Times Dealbook (2013)A pharmaceutical company moved its headquarters to Ireland, sharply reducing its tax rate. A billboard company reclassified itself as a real estate concern, meaning it will no longer pay corporate taxes. And a big oil producer split itself in two, cleaving off a multibillion-dollar division that now operates tax-free.

Across corporate America, companies large and small are finding new ways to address one of the business world’s oldest irritations: paying taxes.

By exploiting existing loopholes and devising new ones, some of the country’s best-known companies are making it harder than ever for the federal government to replenish its already depleted coffers.

As a result, business income tax revenue remains stagnant at about 2 percent of gross domestic product even as corporate profits hit records.

Business taxes now make up less than 10 percent of federal revenue, and in some years as little as 6.6 percent. That is sharply down from the years after World War II, when about 30 percent of federal revenue came from corporate taxes.

The decline is the result of the rise of untraditional business structures, the effects of a more globalized economy and a labyrinth of subsidies and tax credits. And though the erosion has happened gradually over decades, the surging popularity of inversions — acquisitions of overseas companies that allow American corporations to reincorporate abroad — is raising concerns that an already precarious situation is growing untenable.

“There’s been a long, slow, steady decline,” said William G. Gale, co-director of the Urban-Brookings Tax Policy Center and an economic adviser to President George H. W. Bush. “It’s a confluence of a bunch of things, and it’s increasingly difficult to figure out how to effectively tax corporations.” ...

“It’s self-help tax reform,” said Kyle E. Pomerleau, an economist at the Tax Foundation. “If Congress is not willing to reform the corporate tax code, companies are going to do it for themselves.” ...

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September 2, 2014 in Tax | Permalink | Comments (0)

Harrison: Faculty Jobs for Spouses Reduce Opportunities for Others

Gainesville Sun op-ed:  Faculty Jobs for Spouses Can Reduce Opportunities for Others, by Jeffrey L. Harrison (Florida):

Trailing SPouse 2A front-page story in The Sun on Aug. 23 described efforts to accommodate the trailing spouses of highly desirable faculty candidates. It tells the sunnier side of the story, but not the things fair-minded people should consider. That is, if “fair” means equal opportunity, no cutting in line and hiring the best people.

When a trailing spouse is involved, there typically is no public notice that a job is open. Oftentimes a job paying tens of thousands of taxpayer dollars is manufactured. No other person may apply for that job or is likely to even know about the job regardless of his or her qualifications.

In the modern version of the “ol' boy” and “who do you know” systems, it adds the “who are you sleeping with” system. ...

Marriages and partnerships unfortunately fall apart. When they do, UF is stuck with an employee that it would never have hired (and perhaps a position it never would have created) but for the relationship. Since “trailing” was a requirement of being hired, shouldn't there be a re-evaluation when the relationship ends in which all job seekers are finally given a chance for the position?

Does anyone really believe that a trailing spouse is held to the same standard as others? Put differently, do you want to be the dean who says no to someone when the outcome is the loss of an eminent faculty member in another department who the dean there and the president of the university, on whom your position and greatly enhanced salary depend, desperately want to keep?

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September 2, 2014 in Legal Education | Permalink | Comments (2)

O'Reilly: Trends in Tax Legal Scholarship

Terrance O'Reilly (Willamette), Tax Legal Scholarship to 1970, 34 Va. Tax Rev. ___ (2014):

This article examines the evolution of method and styles in tax legal scholarship from 1913 through the 1960s. It focuses on legal scholarship published in law reviews. Section I provides some numerical measures of trends in early and mid-twentieth century tax legal scholarship. Section II is a brief survey of significant casebooks and treatises during the period examined. Section III looks at the development of tax legal scholarship through the 1960s, emphasizing trends in style and method.

Table 1

Figure 2

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September 2, 2014 in Scholarship, Tax | Permalink | Comments (1)

Kennedy: DOMA Implications for Employee Benefit Plans

Tax Analysys Logo (2013)Kathryn J. Kennedy (John Marshall), DOMA Implications for Employee Benefit Plans: Round 2, 144 Tax Notes 947 (Aug. 25, 2014):

This report updates Kennedy’s earlier Tax Notes article on employee benefits guidance issued by the IRS and the Department of Labor soon after the Supreme Court’s 2013 decisions in Hollingsworth v. Perry and United States v. Windsor on the constitutionality of the Defense of Marriage Act. The IRS has since issued additional helpful guidance, and there has been a groundswell of federal and state litigation contesting states’ same-sex marriage bans. In this report, Kennedy discusses the current state of affairs and highlights many of the questions not addressed by the IRS and Labor Department guidance. She argues that without additional regulatory guidance, which appears unlikely, those questions will have to be resolved through future litigation.

September 2, 2014 in Scholarship, Structuring a Tax Workshop Series, Tax Analysts | Permalink | Comments (0)

Tax Foundation: Burger King and Corporate Tax Rates and Revenues

Tax Foundation:  Canada's Lower Corporate Tax Rate Raises More Tax Revenue:

Tax Foundation logoCanada is apparently becoming an attractive place to do business. This week Burger King announced plans to move its headquarters to Canada, via a merger with Tim Hortons. Other U.S. companies that have recently moved or announced plans to move to Canada include Bausch and Lomb, Allergan, and Auxilium. A Bloomberg analysis indicates Tim Hortons was once a U.S. company, until it inverted to Canada in 2009.

Part of the attraction is the substantial tax reforms that occurred over the last 15 years in Canada. First among these is the dramatic reduction in the corporate tax rate, from 43 percent in 2000 to 26 percent today. The U.S. currently has a corporate tax rate of 39 percent, but lawmakers are reluctant to do what Canada did, i.e. lower the tax rate, for fear of losing tax revenue.

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September 2, 2014 in Tax, Think Tank Reports | Permalink | Comments (3)

The IRS Scandal, Day 481

TaxProf Blog Holiday Weekend Roundup

Monday, September 1, 2014

Flying Home to an Empty Nest

My wife Courtney and I are flying back to Malibu today, after helping our daughter Jayne get settled in her apartment in Madison, Wisconsin over the weekend before she starts her job tomorrow at Epic Systems, a health care software company.  Jayne graduated from college three months ago and spent one last special summer with us studying for the MCAT, which she took last Wednesday:


Jayne will be living with her brother Reed, who has been working at Epic since his graduation from college last year.  With both of our children now on their own, our new nest is now physically empty (except for Josie), but is overflowing with precious memories of raising two incredible children and launching them into the world.  I will never forget holding hands with Courtney and Jayne this morning, bawling like a baby while praying over Jayne's new life and thanking God for the countless blessings he has showered on us over the past 22 wonderful years.

Empty Nest

September 1, 2014 in Legal Education, Tax | Permalink | Comments (1)

Don’t Want Me to Recline My Airline Seat? You Can Pay Me

New York Times:  Don’t Want Me to Recline My Airline Seat? You Can Pay Me, by Josh Barro:

Seat ReclineI fly a lot. When I fly, I recline. I don’t feel guilty about it. And I’m going to keep doing it, unless you pay me to stop.

I bring this up because of a dispute you may have heard about: On Sunday, a United Airlines flight from Newark to Denver made an unscheduled stop in Chicago to discharge two passengers who had a dispute over seat reclining. According to The Associated Press, a man in a middle seat installed the Knee Defender, a $21.95 device that keeps a seat upright, on the seatback in front of him.

A flight attendant asked him to remove the device. He refused. The woman seated in front of him turned around and threw water at him. The pilot landed the plane and booted both passengers off the flight.

Obviously, it’s improper to throw water at another passenger on a flight, even if he deserves it. But I’ve seen a distressing amount of sympathy for Mr. Knee Defender, who wasn’t just instigating a fight but usurping his fellow passenger’s property rights. When you buy an airline ticket, one of the things you’re buying is the right to use your seat’s reclining function. If this passenger so badly wanted the passenger in front of him not to recline, he should have paid her to give up that right.

I wrote an article to that effect in 2011, noting that airline seats are an excellent case study for the Coase Theorem. ...

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September 1, 2014 in Legal Education, Tax | Permalink | Comments (32)

President Obama Appoints Ronald Pearlman to the IRS Oversight Board

The White House has announced the appointment of Ronald Pearlman to the Internal Revenue Service Oversight Board:

IRS Oversight BoardRonald Alan Pearlman recently retired as a Professor of Law at the Georgetown University Law Center, a position he held from 1999 to 2014. Previously, he was a Tax Partner at Covington & Burling from 1991 to 2000. Mr. Pearlman was Chief of Staff on the Joint Committee on Taxation of the U.S. Congress from 1988 to 1990 and a Tax Partner at Bryan Cave from 1986 to 1988. Prior to Bryan Cave, Mr. Pearlman served at the Department of the Treasury, first as the Deputy Assistant Secretary for Tax Policy from 1983 to 1984, and subsequently as Assistant Secretary for Tax Policy from 1984 to 1985. Before joining Treasury, Mr. Pearlman was a Tax Partner at Thompson & Coburn from 1969 to 1983. Mr. Pearlman received a B.A. from Northwestern University, a J.D. from the Northwestern University School of Law, and an L.L.M. from the Georgetown University Law Center.

September 1, 2014 in IRS News, Tax | Permalink | Comments (0)

The IRS Scandal, Day 480

Sunday, August 31, 2014

U.S. Hikes Fee to Renounce Citizenship By 422%

Following up on my recent post, Record Numbers of Americans Are Renouncing Their U.S. Citizenship:  Forbes, U.S. Hikes Fee To Renounce Citizenship By 422%, by Robert W. Wood:

PassportOver the last two years, the U.S. has had a spike in expatriations. It isn’t exactly Ellis Island in reverse, but it’s more than a dribble. With global tax reporting and FATCA, the list of the individuals who renounced is up. For 2013, there was a 221% increase, with record numbers of Americans renouncing. The Treasury Department is required to publish a quarterly list, but these numbers are under-stated, some say considerably.

The presence or absence of tax motivation is no longer relevant, but that could change. After Facebook co-founder Eduardo Saverin departed for Singapore, Senators Chuck Schumer and Bob Casey introduced a bill to double the exit tax to 30% for anyone leaving the U.S. for tax reasons. That hasn’t happened, but taxes are still a big issue for many.

To leave America, you generally must prove 5 years of U.S. tax compliance. If you have a net worth greater than $2 million or average annual net income tax for the 5 previous years of $157,000 or more for 2014 (that’s tax, not income), you pay an exit tax. It is a capital gain tax as if you sold your property when you left. At least there’s an exemption of $680,000 for 2014. Long-term residents giving up a Green Card can be required to pay the tax too.

Now, the State Department interim rule just raised the fee for renunciation of U.S. citizenship to $2,350 from $450. Critics note that it’s more than twenty times the average level in other high-income countries. The State Department says it’s about demand on their services and all the extra workload they have to process people who are on their way out.

August 31, 2014 | Permalink | Comments (2)

Love Does

Love DoesOne of my favorite things about Pepperdine is the opportunity to meet some of the interesting people drawn to this place.  At last Wendesday's inaugural law school bible study, I met Bob Goff, an adjunct professor who is a legend on campus.  After meeting Bob, I bought and devoured his wonderful book, Love Does: Discover a Secretly Incredible Life in an Ordinary World:

As a college student he spent 16 days in the Pacific Ocean with five guys and a crate of canned meat. As a father he took his kids on a world tour to eat ice cream with heads of state. He made friends in Uganda, and they liked him so much he became the Ugandan consul. He pursued his wife for three years before she agreed to date him. His grades weren't good enough to get into law school, so he sat on a bench outside the Dean’s office for seven days until they finally let him enroll. 

Bob Goff has become something of a legend, and his friends consider him the world's best-kept secret. Those same friends have long insisted he write a book. What follows are paradigm shifts, musings, and stories from one of the world’s most delightfully engaging and winsome people. What fuels his impact? Love. But it's not the kind of love that stops at thoughts and feelings. Bob's love takes action. Bob believes Love Does.

When Love Does, life gets interesting. Each day turns into a hilarious, whimsical, meaningful chance that makes faith simple and real. Each chapter is a story that forms a book, a life. And this is one life you don't want to miss.

Light and fun, unique and profound, the lessons drawn from Bob's life and attitude just might inspire you to be secretly incredible, too.

I now have the title picked out for my first non-tax book:  Love Blogs.

August 31, 2014 in Book Club, Legal Education, Tax | Permalink | Comments (0)

Top 5 Tax Paper Downloads

SSRN LogoThere is a bit of movement in this week's list of the Top 5 Recent Tax Paper Downloads on SSRN, with a new paper debuting on the list at #3.  The #1 paper is now #22 in all-time downloads among 10,264 tax papers:

  1. [2722 Downloads]  'Competitiveness' Has Nothing to Do with it, by Edward D. Kleinbard (USC)
  2. [467 Downloads]  Guide to FATCA Compliance (Chapter 1, Background and Current Status of FATCA) (LexisNexis 2d ed. 2014), by William Byrnes (Thomas Jefferson), Denis Kleinfeld, & Alberto Gil Soriano
  3. [311 Downloads]  2013 Developments in Connecticut Estate and Probate Law, by Jeffrey A. Cooper (Quinnipiac) & John R. Ivimey (Reid and Riege, Hartford)
  4. [181 Downloads]  The Futility of Tax Protester Arguments, by Allen D. Madison (South Dakota)
  5. [153 Downloads]  The Most Critical Issue Facing Tax Administration Today -- And What to Do About It, by George K. Yin (Virginia)

August 31, 2014 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

The IRS Scandal, Day 479

Saturday, August 30, 2014

Rachel Moran Will Not Seek Second Term as UCLA Dean

Moran 2From: Moran, Rachel
Sent: Friday, August 29, 2014 11:02 AM
To: All Faculty & Staff
Subject: A Message from Dean Moran

Dear Friends and Colleagues,

I am writing to share with you that after careful consideration, I have decided not to pursue a second term as Dean. Over the coming months, Executive Vice Chancellor Scott Waugh will be forming a search committee to seek a replacement, and I have offered to stay in place until a successor is named to ensure a seamless and successful transition.

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August 30, 2014 in Legal Education | Permalink | Comments (0)

This Labor Day Weekend, End the Tyranny of 24/7 Email

New York Times:  End the Tyranny of 24/7 Email, by Clive Thompson:

DisconnectThis Labor Day weekend, odds are you’ll peek at your work email on your “day off” — and then feel guilty about it.

You might envy the serene workers at Daimler, the German automaker. On vacations, employees can set their corporate email to “holiday mode.” Anyone who emails them gets an auto-reply saying the employee isn’t in, and offering contact details for an alternate, on-call staff person. Then poof, the incoming email is deleted — so that employees don’t have to return to inboxes engorged with digital missives in their absence. “The idea behind it is to give people a break and let them rest,” a Daimler spokesman told Time magazine. “Then they can come back to work with a fresh spirit.”

Limiting workplace email seems radical, but it’s a trend in Germany, where Volkswagen and Deutsche Telekom have adopted policies that limit work-related email to some employees on evenings and weekends. If this can happen in precision-mad, high-productivity Germany, could it happen in the United States? Absolutely. It not only could, but it should.

White-collar cubicle dwellers complain about email for good reason. They spend 28 percent of their workweek slogging through the stuff, according to the McKinsey Global Institute. They check their messages 74 times a day, on average, according to Gloria Mark, an authority on workplace behavior and a professor at the University of California, Irvine. And lots of that checking happens at home.

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August 30, 2014 in Legal Education, Tax | Permalink | Comments (1)

Suffolk Law School Offers Buyouts to All Of Its Tenured Faculty

Following up on last month's post, Boston Law Schools Shrink Enrollments, Faculties:  Boston Globe, Suffolk University Abruptly Replaces President:

Sufolk Law SchoolJust days before the start of the new school year, Suffolk University Wednesday abruptly replaced president James McCarthy with a year remaining on his contract, and tapped a veteran educator with a reputation for turning around struggling colleges to serve as interim leader. At an afternoon meeting, the university’s board of trustees voted unanimously to appoint Norman R. Smith, 68, who is best known for his tenure at Wagner College in New York City, where he led a small school on the brink of closing to new prominence.. ...

Given the general decline in law school enrollment, Smith said he would expect to take a “quality over quantity” approach in assembling new classes. “I don’t think there’s growth there,” he said, referring to enrollment. ...

The unexpected change in leadership comes as Suffolk seeks to stabilize its finances and attract students in the college-dense region. Facing a decline in enrollment and revenue, the university announced in June it would freeze employee salaries for the next fiscal year.

It also offered buyouts to all law school faculty members with tenure or renewable long-term contracts.

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August 30, 2014 in Legal Education | Permalink | Comments (1)

The IRS Scandal, Day 478

Friday, August 29, 2014

Medtronic Will Pay CEO’s $25 Million Tax Bill on Merger

Bloomberg:  Medtronic Will Pay CEO’s $25 Million Tax Bill on Merger, by Michelle Fay Cortez & Zachary R. Mider:

MedtronicMedtronic plans to pick up a $25 million tax bill for Chief Executive Officer Omar Ishrak, the cost of a special penalty imposed by Congress on executives who shift their company’s tax domiciles out of the U.S. The company is also paying a $38 million tab for the rest of its top officers and directors, Minneapolis-based Medtronic said in a filing with U.S. regulators. The tax penalty arises from Medtronic’s plan to adopt an Irish address as part of its takeover of Covidien Plc.

The requirement stems from a 2004 law meant to discourage CEO’s from lowering their companies’ tax bills by shifting their legal addresses out of the U.S. It imposes an excise tax, currently 15 percent, on the value of any restricted stock or unexercised options the executives hold at the time of the transaction.

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August 29, 2014 in Tax | Permalink | Comments (0)

Weekly Tax Roundup

Weekly SSRN Tax Roundup

August 29, 2014 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Weekly Legal Education Roundup

More on Tax Court Decision Siding With IRS on Taxation of Frequent Flyer Miles Issued By Citibank

CitiBank LogoFollowing up on Wednesday's post, Tax Court Approves the IRS's Taxation of Frequent Flyer Miles:  Sam Brunson (Loyola-Chicago), Tax Court: Frequent Flier Miles Are Income

What does the Tax Court decision mean to you? Let’s explore the ramifications of the Tax Court’s decision in an Explainer.

  • How can frequent flier miles be income? They’re not money.
  • Did I break the law all those times I got frequent flier miles and didn’t pay taxes on them?
  • Then why did the I.R.S. go after Mr. Shankar?
  • So I’m taxable on the receipt of frequent flier miles from a bank?
  • Okay, so if I get frequent flier miles from my bank, I’m taxable when I redeem them. How about if I get frequent flier miles from my credit card?
  • So how do I know whether I should include my frequent flier miles on my tax return?

Forbes, Tax Court Says Bank 'Thank You' Points Are Taxable Income
Forbes, Tax Court Sides With IRS In Tax Treatment Of Frequent Flyer Miles Issued By Citibank
Legal Times, Value of Bank's 'Thank You' Points is Taxable, Court Says

August 29, 2014 in New Cases, Tax | Permalink | Comments (2)

Mehrotra: The Intellectual Roots of An Economic Interpretation of the Constitution

Ajay K. Mehrotra (Indiana), Charles A. Beard & The Columbia School of Political Economy: Revisiting the Intellectual Roots of the Beardian Thesis, 29 Const. Comment. 475 (2014):

BeardA century after it was first published, Charles A. Beard’s An Economic Interpretation of the Constitution remains a significant and controversial part of constitutional scholarship and history. Just as Beard sought to historicize the Founders as they drafted and adopted the Constitution, this article attempts to historicize Beard as he researched and wrote his classic text on the Constitution. Because Beard was both a graduate student and professor at Columbia University before and while he researched and wrote his book, this article explores the particular influence that Columbia University’s institutional and intellectual climate may have had on Beard and the writing of An Economic Interpretation of the Constitution.

This article contends that Charles Beard was the product of a unique Columbia tradition of inductive, proto-institutionalist research in political economy – a tradition that at its core sought to meld serious political and historical scholarship with progressive social activism. Yet, in many ways, Columbia’s influence on Beard was more reinforcing than it was revolutionary. Columbia, in other words, facilitated an evolution rather than a dramatic transformation in Beard’s thinking. His time at Columbia provided him with new scholarly perspectives and research methods, but ultimately these new views heightened his innate tension between scholarly objectivity and political advocacy, between his belief in social scientific research and his desires for social democratic reform. In short, Beard’s time at Columbia, as both a student and junior scholar, refined his personal predilections and his early upbringing and education, rather than radically converting him into a new thinker and writer.

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August 29, 2014 in Book Club, Scholarship, Tax | Permalink | Comments (0)

IMF Names Top 25 Economists Under 45

IMFInternational Monetary Fund, Generation Next: 25 Economists Under 45 Who Are Shaping the Way We Think About the Global Economy:

We asked you, our readers, and assorted international economists and journal editors to tell us which economists under 45 will have the most influence in the coming decades on our understanding of the global economy. F&D researcher Carmen Rollins gathered information from scores of sources to compile this—by no means exhaustive—list of economists to keep an eye on.

International Business Times, IMF Lists 25 Brightest Young Economists

Here is the list of institutes: MIT-five, Harvard - six, Princeton - two, University of Chicago - three, New York University - two, University of California - one, University of Columbia - one, University of Stanford - two, Peterson Institute - one. The non-US institutions are the London Business School, and Paris School of Economics.

August 29, 2014 in Legal Education, Tax | Permalink | Comments (0)

The IRS Scandal, Day 477

IRS Logo 2Sharyl Attkisson:  Can Justice Dept. Investigate IRS Impartially?:

Should a special counsel take over the Justice Department probe of lost IRS emails and the targeting of conservative tax-exempt groups?

Attorney General Eric Holder says there’s no need: his Justice Department is conducting a thorough and fair investigation.

But can the Justice Department be impartial in IRS probe of “lost” documents while, at the same time, defending the IRS in civil litigation over the lapse?

The question is raised in the context of a Freedom of Information lawsuit filed against the IRS by the conservative watchdog Judicial Watch. In what seems to be yet another about-face, Justice Department lawyers Friday told Judicial Watch the elusive documents may have been saved, after all, on some type of government-wide backup system from which materials are difficult to retrieve. So, on the one hand, the Justice Department is investigating the IRS. On the other, it is representing and defending the IRS.

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August 29, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Thursday, August 28, 2014

How Northeastern University Gamed the U.S. News Rankings to Rise From #162 to #49

Northeastern UniversityBoston Magazine, How to Game the College Rankings:

[Richard] Freeland swept into Northeastern [in 1996] with a brand-new mantra: recalibrate the school to climb up the ranks [from #162 in U.S. News]. “There’s no question that the system invites gaming,” Freeland tells me. “We made a systematic effort to influence [the outcome].” He directed university researchers to break the U.S. News code and replicate its formulas. He spoke about the rankings all the time—in hallways and at board meetings, illustrating his points with charts. He spent his days trying to figure out how to get the biggest bump up the charts for his buck. He worked the goal into the school’s strategic plan. “We had to get into the top 100,” Freeland says. “That was a life-or-death matter for Northeastern.” ...

For those at Northeastern, breaking into the U.S. News top 100 was like landing a man on the moon, but Freeland was determined to try. Reverse-engineering the formulas took months; perfecting them took years. “We could say, ‘Well, if we could move our graduation rates by X, this is how it would affect our standing,’” Freeland says. “It was very mathematical and very conscious and every year we would sit around and say, ‘Okay, well here’s where we are, here’s where we think we might be able to do next year, where will that place us?’”

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August 28, 2014 in Law School Rankings, Legal Education | Permalink | Comments (5)

Marian: Home-Country Effects of Corporate Inversions

Omri Y. Marian (Florida), Home-Country Effects of Corporate Inversions, 90 Wash. L. Rev. ___ (2015):

This article develops a framework for the study of the unique effects of corporate inversions (meaning, a change in corporate-residence for tax purposes) in the jurisdictions from which corporations invert (“home jurisdictions”). Currently, empirical literature on corporate inversions overstates its policy implications. It is frequently argued that in response to an uncompetitive tax environment, corporations may relocate their headquarters for tax purposes, which, in turn, may result in the loss positive economic attributes in the home jurisdiction (such as capital expenditures, R&D activity, and high-quality jobs). The association of tax-residence relocation with the dislocation of meaningful economic attributes, however, is not empirically-supported and is theoretically-tenuous. The article uses case studies to fill this gap. Based on observed factors, the article develops grounded propositions that may describe the meaningful effects of inversions in home jurisdictions. Such propositions may guide future empirical research aimed at identifying the meaningful effects of inversions. The case studies suggest that whether tax-relocation is associated with the dislocation of meaningful economic attributes in home-jurisdictions is a highly contextualized question. It seems, however, that inversions are more likely to be associated with dislocation of meaningful attributes when non-tax factors support the decision to invert.

August 28, 2014 in Scholarship, Tax | Permalink | Comments (0)

Brunson: The Taxation of Mutual Funds

Samuel D. Brunson (Loyola-Chicago), The Taxation of RICs: Replicating Portfolio Investment or Eliminating Double Taxation?:

Mutual FundsMutual funds and other regulated investment companies currently occupy a central space in American households’ financial lives. Is spite of their near-ubiquity, though, regulated investment companies occupy a strange tax limbo as quasi-pass-through entities, neither fully taxable nor fully tax-transparent. To qualify for this quasi-pass-through status, regulated investment companies must, among other things, distribute the bulk of their income to shareholders annually.

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August 28, 2014 in Scholarship, Tax | Permalink | Comments (1)

Vann: The Policy Underpinnings of BEPS

Richard J. Vann (Sydney), Policy Forum: The Policy Underpinnings of the BEPS Project-Preserving the International Corporate Income Tax?, 62 Canadian Tax J. 433 (2014):

BEPSThe OECD/G20 Action Plan on Base Erosion and Profit Shifting (BEPS) is receiving significant attention from taxpayers and national governments. Because the action plan is about action, it contains little discussion of the tax policy questions involved. One of the less-noticed aspects of the plan is action 11. From its heading and most of its content, action 11 seems to be largely about collecting data on BEPS, but it also involves the underlying policy. That is perhaps not surprising, since there is an inherent contradiction between the action plan and much of the policy work on corporate taxation undertaken by the OECD over the last 25 years. This article discusses the policy conflict and make the case for a more balanced view of the international corporate income tax.

August 28, 2014 in Scholarship, Tax | Permalink | Comments (0)

Law School Rankings by BigLaw Associates' Satisfaction With Their Legal Education

American Lawyer LogoAmerican Lawyer, Which Schools Produce the Most Satisfied Big-Firm Lawyers?:

As part of our Midlevel Associates Survey, we asked respondents to rate their law schools on how well they prepared them for firm life on a five-point scale, with 5 being the highest possible score. Of all the questions on the survey, this is the one that correlated most strongly with overall job satisfaction. Below are the law schools that had 20 or more respondents to the survey, ranked by the average scores their alumni gave them on this question. The 53 schools that qualified had a total of 4,767 respondents, who gave them an average score of 3.74. Differences in score of 0.05 or less between schools are not statistically significant.

AmLaw Rank

School (Respondents)


US News Rank


Duke (79)




Michigan (117)




Loyola-L.A. (46)




Stanford (73)




Chicago (87)




William & Mary (23)




Emory (42)




Vanderbilt (34)




Virginia (133)




Northwestern (108)




Georgia (23)




Houston (20)




Illinois (30)




Texas (83)




Catholic (23)




SMU (27)




Temple (43)




Washington U. (40)




Notre Dame (35)




Florida (33)



T14 schools that fared poorly in the ranking: Yale (24), Cornell (28), NYU (35), Penn (37), Harvard (42), Columbia (43), Georgetown (44).

August 28, 2014 in Law School Rankings, Legal Education | Permalink | Comments (1)

Rolling Stone: The Biggest Tax Scam Ever

Rolling Stone 2Rolling Stone:  The Biggest Tax Scam Ever, by Tim Dickinson:

Over the next decade, corporate inversions could cost the U.S. Treasury nearly $20 billion – revenues that could other­wise pay for Head Start programs, to rebuild roads and bridges, or just bring down the deficit. The wave of inversions is threatening "to hollow out the U.S. corporate income tax base," Lew warned in a July letter to the chief tax writers in the House and Senate. But inversions are just the tip of the iceberg. The crisis of corporate tax avoidance is far more pervasive – and destructive – than either Obama or Lew is letting on. At a moment when Congress appears impossibly divided, a strong, bipartisan consensus has, in fact, emerged in Washington: The world's richest corporations will get away with fleecing hundreds of billions of tax dollars from the rest of us. ...

The details of corporate tax avoidance can be dizzyingly complex. But the broad strokes are simple. For more than a century, American corporations have been required to pay taxes on their global income. There's no double taxation problem; companies receive credit for taxes paid over to other governments. The logic of our system is straightforward: U.S. corporate citizens enjoy benefits that aren't cabined inside our borders. The U.S. Navy secures shipping lanes needed to transport goods from Chinese factories to ports around the world. The American legal system protects corporate patents and other intellectual property worldwide. U.S. taxpayers fund the R&D that makes many of these corporations profitable in the first place.

There is one odd hitch in our system of global taxation. The corporate tax bill – nominally 35 percent – is not due in America until the foreign profits come home. In the jargon of the corporate world, the taxes are "deferred" until the profits are "repatriated." Until then, the offshore cash can be invested and grow U.S.-tax-free, not unlike your 401(k).

"The deferral tax break really highlights how broken our tax code is," says Ron Wyden, the Oregon Democrat who chairs the Senate Finance Committee. "When you park a big chunk of cash overseas, you get a huge tax break for it."

In reality, much of the untaxed income is actually earned in the United States before elaborate accounting schemes siphon it overseas. The racket is simplest for tech and pharmaceutical companies, whose value is tied to intellectual property. ...

Contrary to what the term "offshore" might suggest, these untaxed profits are not stranded. "There's this false notion that these funds are locked in a strongbox somewhere," says Edward Kleinbard, a former chief of staff for Congress' Joint Committee on Taxation. In reality, these untaxed foreign profits are often banked, by the offshore subsidiaries themselves, in Manhattan – where they're used to invest in stocks and U.S. Treasury bonds. "The money," says Kleinbard, "is already back in the U.S. economy."

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August 28, 2014 in Tax | Permalink | Comments (0)

Prof Tells Students: Don't Email Me

Inside Higher Ed, Don't Email Me:

Email SyllabusA Salem College faculty member last semester took an uncompromising approach to curbing syllabus and inbox bloat: Why not ban most student emails?

“For years, student emails have been an assault on professors, sometimes with inappropriate informality, sometimes just simply not understanding that professors should not have to respond immediately,” Spring-Serenity Duvall, assistant professor of communications at Salem College, wrote in a blog post last week. “In a fit of self-preservation, I decided: no more. This is where I make my stand!”

Duvall’s frustration is shared by many in academe -- or anyone with an email account -- from faculty members beset by questions they have answered both in class and in writing to students inundated by university email blasts. This spring, when Duvall taught at the University of South Carolina at Aiken, she adopted a new email policy to cut down on emails from students telling her they would be late, or would miss class, or would have leave early, or any of the countless others that could be

Instead of wasting class time on walking her students through an increasingly complicated flowchart diagram of when they could and could not email her, Duvall stopped the problem at its core: No emails -- unless you’re scheduling an in-person meeting.

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August 28, 2014 in Legal Education | Permalink | Comments (15)

Pepperdine Bible Study

With my friend and colleague Jim Gash away this semester teaching in Pepperdine's London Program, my wife and I have the honor of hosting the law school's Wednesday night Bible Study, which kicked off last night:

Bible Study 2

August 28, 2014 in Legal Education, Tax | Permalink | Comments (0)

The IRS Scandal, Day 476

IRS Logo 2New York Post editorial:  IRS Back-up Baloney:

Some 15 months after Americans learned about the IRS’ targeting of conservative groups, we still have no clue how such an abuse was allowed to happen. And every day, the story only gets murkier.

This week, for instance, a government watchdog group, Judicial Watch, said administration officials admitted that all the “missing” e-mails belonging to Lois Lerner (the woman at the heart of the scandal) had been backed up after all — as part of a practice to back up all the government’s e-mails. ...

An administration official later denied it had said anything new to Judicial Watch and claimed the group was mischaracterizing the facts. The problem for Americans is that the government’s story has always seemed incredible — so why believe anything it says now?

There’s more: According to a sworn declaration, Lerner had two Blackberries, one of which contained all of the e-mails that would have been sent to her crashed computer. But that Blackberry “was removed or wiped clean of any sensitive or proprietary information and removed as scrap for disposal in June 2012” — even after the hard drive “crash” and months after an initial congressional inquiry. How did that happen?

The more we learn, it seems, the less we know. And the less the public can trust their own government. It’s long past time for real answers.

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August 28, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Wednesday, August 27, 2014

Tax Court Approves the IRS's Taxation of Frequent Flyer Miles

CitiBank LogoThe Tax Court yesterday required the taxpayer to include $668 in income as reported by Citibank on Form 1099-MISC as the value of an airline ticket received by the taxpayer upon redemption of 50,000 "Thank You Points" from opening a Citibank account. Shankar v. Commissioner, 143 T.C. No. 5 (Aug. 26, 2014).

(Hat Tip: Phil Hackney.)

Update:  Sam Brunson (Loyola-Chicago), Tax Court: Frequent Flier Miles Are Income

August 27, 2014 in IRS News, Tax | Permalink | Comments (2)

Visualizing Employment by Law School

Lawyer Metrics:  Visualizing Employment By Law School, Part I, by Christopher Zorn:

We looked at the schools in the top 50 of the U.S. News 2014 rankings, and plotted the percentages of each school’s graduates in each of the ABA’s summary outcome categories. Higher values are indicated by blue, and lower values by orange or red (with grey in the middle). We also included a “dendrogram” at the top; this is a visual representation of how similar each of the categories are to each other, based on the distributions of their values across the different schools.

Visualizing I

Lawyer Metrics: Visualizing Employment By Law School, Part II, by Christopher Zorn:

Returning to the ABA’s employment data for 2014, we can use a shaded area plot to see how the various employment outcomes vary as we move through the U.S. News rankings. Each shaded area represents the proportion of a school’s graduates who achieved a particular type of employment outcome, with the schools ordered by their 2014 U.S. News ranking.

Visualizing II

August 27, 2014 in Law School Rankings, Legal Education | Permalink | Comments (1)

CBO: An Update to the Budget and Economic Outlook

Congressional Budget Office, An Update to the Budget and Economic Outlook (Aug. 2014):

Figure 1-1


August 27, 2014 in Congressional News, Gov't Reports, Tax | Permalink | Comments (1)

IRS Ethics Lawyer Facing Possible Disbarment

IRS Logo 2Washington Times, IRS Ethics Lawyer Facing Possible Disbarment, Accused of Lying:

A lawyer in the IRS ethics office is facing the possibility of being disbarred, according to records that accuse her of lying to a court-appointed board and hiding what she’d done with money from a settlement that was supposed to go to two medical providers who had treated her client.

The disciplinary arm of the D.C. Court of Appeals has recommended that Takisha McGee, a section manager in the IRS Office of Professional Responsibility, lose her law license over the charge, which stems from a personal injury case she worked about a year before she joined the tax agency.

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August 27, 2014 in IRS News, Tax | Permalink | Comments (0)

More Tax Inversion News

(Hat Tip: Bruce Bartlett.)

August 27, 2014 in Tax | Permalink | Comments (0)

SSRN Tax Professor Rankings

SSRN LogoSSRN has updated its monthly rankings of 944 American and international law school faculties and 3,000 law professors by (among other things) the number of paper downloads from the SSRN database.  Here is the new list (through August 1, 2014) of the Top 25 U.S. Tax Professors in two of the SSRN categories: all-time downloads and recent downloads (within the past 12 months):







Reuven Avi-Yonah (Mich.)


Reuven Avi-Yonah (Mich.)



Paul Caron (Pepperdine)


Richard Ainsworth (BU)



Louis Kaplow (Harvard)


Paul Caron (Pepperdine)



D. Dharmapala (Chicago)


D.Dharmapala (Chicago) 



Vic Fleischer (San Diego)


Richard Kaplan (Illinois)



James Hines (Michigan)


Bridget Crawford (Pace)



Ted Seto (Loyola-L.A.)


Omri Marian (Florida)



Richard Kaplan (Illinois)


Katie Pratt (Loyola-L.A.)



Katie Pratt (Loyola-L.A.)


Robert Sitkoff (Harvard)



Dennis Ventry (UC-Davis)


Ed Kleinbard (USC)



Carter Bishop (Suffolk)


Brad Borden (Brooklyn)



Jen Kowal (Loyola-L.A.)


Jen Kowal (Loyola-L.A.)



David Weisbach (Chicago)


Dick Harvey (Villanova)



Chris Sanchirico (Penn)


Louis Kaplow (Harvard)



David Walker (BU)


Jeff Kwall (Loyola-Chicago)



Richard Ainsworth (BU)


James Hines (Michigan)



Francine Lipman (UNLV)


Francine Lipman (UNLV)



Bridget Crawford (Pace)


Ted Seto (Loyola-L.A.)



Robert Sitkoff (Harvard)


Dan Shaviro (NYU)



Brad Borden (Brooklyn)


David Gamage (UCBerkeley)



Ed Kleinbard (USC)


Vic Fleischer (San Diego)



Herwig Schlunk (Vanderbilt)


Carter Bishop (Suffolk)



Dan Shaviro (NYU)


Dan Simmons (UC-Davis)



Ed McCaffery (USC)


Brian Galle (Boston College)



Wendy Gerzog (Baltimore)


David Weisbach (Chicago)


Note that this ranking includes full-time tax professors with at least one tax paper on SSRN, and all papers (including non-tax papers) by these tax professors are included in the SSRN data.

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August 27, 2014 in Legal Education, Scholarship, Tax, Tax Prof Rankings | Permalink | Comments (0)

Schizer Named to Ginsburg Visiting Chair in Taxation at Georgetown

SchizerGeorgetown Press Release, Georgetown Law Appoints David Schizer to Ginsburg Chair:

Georgetown University Law Center Dean William M. Treanor is pleased to announce the appointment of David Schizer to the Martin D. Ginsburg Chair in Taxation. Schizer will hold the chair as a visiting professor during the 2015 spring semester.

“David Schizer is an extraordinarily gifted scholar of tax law and policy and a wonderful teacher, and he left a great mark as dean at Columbia. We are delighted that he will be visiting at Georgetown, and he is the ideal choice to hold the Ginsburg Chair. Marty Ginsburg was an important mentor for David, who also clerked for Justice Ginsburg,” said Treanor. “We are deeply grateful to H. Ross Perot for his generosity in endowing this chair, a fitting tribute to Marty’s great contributions as a lawyer, a scholar and a teacher.”

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August 27, 2014 in Legal Education, Tax, Tax Prof Moves | Permalink | Comments (0)

E&Y: The Outlook for Global Tax Policy in 2014

E&YErnst & Young, The Outlook for Global Tax Policy in 2014 (226 pages):

Taxes around the world are on the rise. But these rises may be a bit less obvious than in the past.

Governments are generally making fewer changes to headline corporate, personal and indirect tax rates in 2014 compared with 2013 and 2012. Instead, more are putting legislative changes in place that will adjust and expand the tax base for 2014 and beyond, often at the net expense of taxpayers.

Overall, just 10 countries of the 61 we surveyed have so far announced reductions to statutory corporate income tax (CIT) rates for 2014. Conversely, our respondents expect corporate tax burdens to be higher in 16 countries, although the increase in just 3 of those (France, India and Israel) can be attributed in part to a higher statutory rate. The higher burden forecast for the others stems from changes that broaden their tax base. The most common base-broadeners seen in new legislation so far include:

  • Increased tax enforcement, including more demands for disclosure and transparency, renewed focus on audit activities, and new or amended General Anti-Avoidance Rules (GAAR)
  • Changes to R&D tax incentives
  • Refinements to incentives designed to encourage capital investment
  • Changes to withholding taxes • Tighter transfer pricing regulations and oversight
  • Limits on interest and business expense deductibility, including a growing focus on payments made to “low tax” jurisdictions
  • Decreases to the statutory corporate income tax rate
  • Limitations to the tax treatment of losses
  • Tougher controlled foreign company (CFC) rules
  • More stringent thin capitalization rules

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August 27, 2014 in Tax | Permalink | Comments (1)

The IRS Scandal, Day 475

IRS Logo 2Real Clear Politics:  George Will on IRS: "It Is Off The Rails And It Is Now Thoroughly Corrupted":

I can just hardly wait until the IRS lawyers go into that courtroom and tell the judge that it would be too onerous to stop obstructing justice in this case. That's a really interesting defense. You know, Lily Tomlin, the comedian, used to have a character, the Bag Lady, who said, 'no matter how cynical you get you, just can't keep up.' And that's the way it was with the IRS.

Remember this thing began in deceit with Lois Lerner planting a question to reveal this getting ahead of the Inspector General of the IRS report. Then there were a few rogue agents in Cincinnati. The IRS is the most intrusive and potentially punitive institution of the federal government and it is a law enforcement institution and it is off the rails and it is now thoroughly corrupted.

People are saying, 'well, the Justice Department can take care of this.' There is a reason why Jack Kennedy had his brother [as] Attorney General. There is a reason why Richard Nixon had his campaign manager John Mitchell [as] Attorney General. It is an inherently political office and it can't be trusted in cases like this.



The order from U.S. District Court Judge Emmett Sullivan was certainly clear enough. In a landmark victory for Judicial Watch, the federal judge ordered the IRS to submit sworn declarations detailing what happened to Lois Lerner’s “lost” emails and what steps were being taken to find them. What was provided was a garbled explanation from no less than five IRS officials with more holes than a block of Swiss cheese. ...

These sworn declarations came from five IRS officials: Aaron G. Signor, John H. Minsek, Stephen L. Manning, Timothy P. Camus, and Thomas J. Kane.

We noted that the IRS and DOJ filings seem to treat as a joke Judge Sullivan’s order requiring the IRS to produce details about Lois Lerner’s “lost” emails and any efforts to retrieve and produce them to Judicial Watch as required under law.

This is the story we’re supposed to believe, according to these IRS officials: Lerner’s crashed drive was analyzed by two technicians who employed a variety of tech tactics to recover the data, to no avail. The drives – which, mind you, had no recoverable data according to these experts – were then “degaussed” (wiped clean) “to protect against any possible disclosure of… taxpayer information.” Anyone with even a passing familiarity with the IRS email scandal would have realized that these filings were a blatant continuation of the cover-up.

Well, if there’s one thing I know, it is that most federal courts don’t take kindly to being treated disrespectfully and expected to act like a somnolent member of Congress as administration officials mislead, omit, and play games.

Sure enough, in a stunning move, Judge Sullivan took the extraordinary step of launching an independent inquiry into the issue of Lerner’s missing emails. ...

Judicial Watch has filed hundreds of FOIA lawsuits. I have never seen this type of court action in all my 16 years at Judicial Watch.

Judge Sullivan has already authorized Judicial Watch to submit a request for limited discovery into the missing IRS records after September 10. So stay tuned for further details very soon.

Judge Sullivan took the additional step of appointing Magistrate Judge John M. Facciola to manage and assist in discussions between Judicial Watch and the IRS about how to obtain the missing records. Magistrate Facciola is an expert in e-discovery.

August 27, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Tuesday, August 26, 2014

Today Marks My 25th Year as a Law Professor

25 YearsToday I taught my first class of the 2014-15 academic year, my 25th year as a full-time law professor. Things certainly have changed in my Estate & Gift Tax course:










Estates Subject to Tax



Annual Exclusion



August 26, 2014 in Legal Education, Tax | Permalink | Comments (3)

Harvard Business Review: The Conversation We Should Be Having About Corporate Taxes

Harvard Business Review, The Conversation We Should Be Having About Corporate Taxes:

Harvard Business Review LogoThe corporate inversion — when a U.S. company takes on the legal identity of foreign subsidiary, usually in order to reduce its taxes — has become about as controversial as corporate finance topics get. President Obama has called such transactions “unpatriotic.” Others have defended them as a way for American companies to stay competitive in the face of a uniquely intrusive tax code.

Harvard Business School’s Mihir Desai and Bill George both fall mostly in the second camp, but with some surprising twists that came out when I spoke with them recently. Desai is a professor at Harvard Business School and Harvard Law School who has done a lot of research on corporate taxes, and wrote the July-August 2012 HBR article “A Better Way to Tax U.S. Businesses.” George is a professor at HBS and the former CEO of Medtronic, which has been involved in one of this year’s highest-profile inversion transactions, a merger with Ireland-based Covidien.

Part of our conversation was recorded for an HBR Ideacast, which you can listen to below. What follows that is an edited, much-condensed transcript of both the Ideacast and the progressively wonkier discussion that ensued after the podcast was done.

(Hat Tip: Bruce Bartlett.)

August 26, 2014 in Tax | Permalink | Comments (0)