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Tuesday, September 16, 2014

Florida State Remembers Dan Markel

MarkelFlorida State is holding a memorial service today to remember Dan Markel, who was shot and killed on July 18. Speakers include faculty from Florida State and other law schools, current and former students, and Dan's sister. Dean Don Weidner will present the Alumni Class of 1966 Award to Dan’s Parents, Phil Markel and Ruth Markel. For the full program, see here

Dan's friends and family have set up a website, Help Us Tell Dan Markel’s Story.  For more memorial tributes to Dan, see here.  For updates on the investigation into Dan's murder, see here.

September 16, 2014 in Legal Education | Permalink | Comments (0)

U.S. Ranks 32nd (out of 34 OECD Countries) in International Tax Competitiveness

Tax Foundation, 2014 International Tax Competitiveness Index:

Tax Foundation logoThe Tax Foundation’s International Tax Competitiveness Index (ITCI) measures the degree to which the 34 OECD countries’ tax systems promote competitiveness through low tax burdens on business investment and neutrality through a well-structured tax code. The ITCI considers more than forty variables across five categories: Corporate Taxes, Consumption Taxes, Property Taxes, Individual Taxes, and International Tax Rules. The ITCI attempts to display not only which countries provide the best tax environment for investment but also the best tax environment to start and grow a business.

Tax Foundation

Wall Street Journal editorial, We're Number 32! A New Global Index Highlights the Harm From the U.S. Tax Code.:

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September 16, 2014 in Tax, Think Tank Reports | Permalink | Comments (7)

Applications Decline at All Five Georgia Law Schools

The IRS Scandal, Day 495

IRS Logo 2Wall Street Journal editorial:  Covering for the IRS:

The IRS targeting of conservative groups has now become a story about the cover-up. More than a year after the scandal became public, the most transparent Administration in history has done everything in its power to spin the story, stymie Congressional investigators and run out the clock.

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September 16, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Monday, September 15, 2014

Benzarti Presents How Taxing is Tax Filing? Today at UC-Berkeley

UC Berkeley Primary Logo Berkeley BlueYoussef Benzarti (UC-Berkeley, Department of Economics) presents How Taxing is Tax Filing? Leaving Money on the Table Because of Compliance Costs at UC-Berkeley today as part of the Robert D. Burch Center for Tax Policy and Public Finance Seminar:

I use a quasi-experimental design to estimate the burden of complying with the tax code. Employing a sample of US income tax returns, I observe the preferences of taxpayers over itemizing deductions or claiming the standard deduction. Treated taxpayers forgo $800 on average to avoid the cost of itemizing. A revealed preference argument implies that itemizing deductions is as painful as working more than 17 hours at one’s regular job. The amount of foregone benefits is larger for richer households, consistent with the fact that the value of time increases with income. I explore two explanations of the magnitude of the estimates. First, it could be due to an extreme aversion to filing taxes. Such aversion implies that itemizing deductions imposes an aggregate compliance cost of 0.24% of GDP and an extrapolation to filing federal taxes implies that the overall cost of compliance is 1.55% of GDP. Second, if taxpayers are time-inconsistent the revealed preference argument fails, introducing a wedge between foregone benefits and compliance costs. Being present-biased leads taxpayers to forego large benefits even when compliance costs are relatively small. I provide evidence of taxpayers being present-biased. Both explanations - whether driven by preferences or mistakes - suggest that the burden imposed on society by tax compliance is significantly larger than previously estimated. I discuss policy implications of the result.

September 15, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Shurtz Presents Long-Term Care and the Tax Code: A Feminist Perspective Today at Loyola-L.A.

ShurtzNancy Shurtz (Oregon) presents Long-Term Care and the Tax Code: A Feminist Perspective at Loyola-L.A. today as part of its Tax Policy Colloquium Series:

Long-term care is a feminist issue. Not only do women live longer but we suffer more from a multitude of degenerative physical and mental ailments that require supervised and concentrated care. We comprise 70% of the unpaid caregiver and over 90% of the paid caregiver. Because of low wages, interruptions in work for care of children and parents, lower pensions, women have fewer resources and thus may not adequately save or plan for expensive future long-term care expenses. Consequently, women are more likely to use social insurance (Medicare, Medicaid) and long term care insurance. From home care, adult care, continuing care to nursing home care, the tax code provides numerous but ineffective and inequitable subsidies. The tax system favors the purchase of long-term care insurance over savings, fails to value the unpaid caregiving services of family members, and inadequately supports the low-wage care worker. This paper suggests tax reform in addition to non tax reform. The Community Living Assistance Support and Services (CLASS) Act of the Affordable Care Act should be reinstated and funded and the Family Medical Leave Act should be modified and expanded. Eventually, the federal government will probably need to institute a Medicare tax on workers to fund the growing problem of financing and supporting elder care in America.

Vivian Wu (USC) is the commentator.

September 15, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (1)

NY Times: Student Loans Increasingly Burden the Elderly, Not Just the Young

New York Times:  Student Loan Debt Burdens More Than Just Young People, by Elizabeth Olson:

NY Fed[A]n estimated two million Americans age 60 and older ... are in debt from unpaid student loans, according to data from the Federal Reserve Bank of New York. Its August Household Debt and Credit Report said the number of aging Americans with outstanding student loans had almost tripled from about 700,000 in 2005, whether from long-ago loans for their own educations or more recent borrowing to pay for college degrees for family members.

The debt among older people is up substantially, to $43 billion from $8 billion in 2005, according to the report, which is based on data from Equifax, the credit reporting agency. As of July 31, money was being deducted from Social Security payments to almost 140,000 individuals to pay down their outstanding student loans, according to Treasury Department data. That is up from just under 38,000 people in 2004. Over the decade, the amounts withheld more than tripled, to nearly $101 million for the first seven months of this year from over $32 million in 2004.

While older debtors account for a small fraction of student loan borrowers, who have accumulated nearly $1 trillion in such debt, the effect of owing a constantly ballooning amount of debt but having a fixed income can be onerous, said Senator Bill Nelson, Democrat of Florida, chairman of the Senate Special Committee on Aging.

“Those in default on their loans can see their Social Security checks garnished, leaving them with retirement income that leaves them well below the poverty line,” he said at a committee hearing this week to examine the issue. “Some may think of student loan debt as a young person’s problem,” he said, “but, as it turns out, that is increasingly not the case.” ...

The Government Accountability Office warned this week about the growth of educational debt among seniors. It released a report that relied on different data from that used by the Federal Reserve Bank of New York, but nonetheless painted an ominous picture of lingering debt burden.


More than 80 percent of the outstanding balances are from seniors who financed their own education, the GAO report concluded, and only 18 percent were attributed to loans used to finance the studies of a spouse, child or grandchild. But the default rate for these loans is 31 percent — a rate that is double that of the default rate for loans taken out by borrowers between the ages of 25 and 49 years old, according to agency data.

(Hat Tip: Mike Talbert.)

September 15, 2014 in Legal Education | Permalink | Comments (1)

State Tax Fairness Rankings

Wallet Hub, 2014′s Most & Least Fair State Tax Systems:

Fair TaxAs a follow up to our 2014 Tax Fairness Survey which focused largely on federal tax policy, WalletHub has analyzed and ranked the 50 states based on the fairness of their state and local tax systems. To rank the states, Wallethub conducted a nationally representative online survey of 1,050 individuals to assess what Americans think a fair state and local tax system looks like. Our analysts then compared what Americans think is fair to data on the real structure of tax systems in all 50 states. We believe this is the first ever ranking of state and local tax fairness that matches representative data on what Americans think is fair with real data on the structure of state and local tax systems.



Most Fair Tax Systems


Least Fair Tax Systems















South Carolina 














































(Hat Tip: Bruce Bartlett.)

September 15, 2014 in Tax | Permalink | Comments (1)

Understanding Thomas Piketty and His Critics

PikettyThe Heritage Foundation: Understanding Thomas Piketty and His Critics, by Curtis S. Dubay & Salim Furth:

Thomas Piketty’s Capital in the Twenty-First Century is a treatise on how wealth inequality evolves in capitalistic economies. Piketty uses data stretching back to the 18th century to describe the historical evolution of wealth and inequality, proposes a model that matches the data, and uses that model to predict rising wealth inequality in the 21st century. He recommends punitive taxes on high incomes and wealth to prevent the scenario that he predicts. However, the best critiques of Piketty have shown that most of the links in his argument are broken. Piketty’s model does not match his data as well as he claims. His prediction of permanently rising wealth inequality rests on two implausible modeling assumptions. And his recommendation of punitive taxes is based on the glib assumption that capital accumulation is unimportant for wage growth, an assumption at odds with the data and even with his own model. As a result, almost nothing in Capital in the Twenty-First Century can be applied usefully to policymaking.


September 15, 2014 in Book Club, Scholarship, Tax | Permalink | Comments (3)

Blanchard Takes Issue With Kleinbard's Call for Anti-Inversion Legislation

Tax Analysys Logo (2013) Kimberly S. Blanchard (Weil, Gotshal & Manges, New York), Blanchard Argues Against More Anti-Inversion Rules, 144 Tax Notes 1335 (Sept. 15, 2014):

I write to comment on Edward D. Kleinbard's recent article ['Competitiveness' Has Nothing to Do With It, 144 Tax Notes 1055 (Sept. 1, 2014)] on the subject of "inversions." Kleinbard is, as usual, erudite and funny, but all the erudition and humor in the universe cannot hide the hole in his argument.

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September 15, 2014 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

NY Times: Jeers and Cheers Over Tax Inversions

New York Times:  Jeers and Cheers Over Tax Inversions, by Jeff Sommer:

[M]ost American consumers, investors and politicians have tacitly accepted that if a company is profitable, doesn’t violate the law and produces appealing products and services, it can operate wherever and however it likes. That’s why the furor over tax inversions is so intriguing. ...

Investors appear to like tax inversions. After Burger King said it would embark on one, its shares rose an astonishing 19.5 percent in a single day. No wonder that earlier this month, Newedge USA, a unit of Société Générale, said that “the rising tide of opposition in Washington, D.C., toward reincorporating for tax reasons may, in fact, accelerate deal-making as companies rush to complete conversions and other tax strategies before legislative changes.”

After years of a rising stock market and buoyant profits, much of them held abroad, American companies are engaging in a spree of mergers and acquisitions. And the United States is nearly alone among major industrialized nations in taxing — or, more realistically, trying to tax — all the worldwide income of corporations domiciled within its territory. Canada, Switzerland and nearly every place else tax only the income earned in their own territories. This makes tax planning much simpler. ...

[I]nversions may make it much easier to reduce American corporate taxes, Edward Kleinbard, a professor of law and business at the University of Southern California, said in a recent report. He opposes inversions, saying they are stripping the United States of its tax base. ... 

In a study of “the first wave of tax inversions” — those that took place before Congress tightened the rules in 2004 — [Elizabeth Chorvat, a visiting professor at the University of Illinois college of business] found that companies that moved their tax domiciles outperformed the overall stock market. It’s too early to tell whether the current wave will be similarly lucrative, she said, but corporate motivations are clear. While inversions prompt immediate tax bills for some shareholders, she said, they often end up being beneficial.

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September 15, 2014 in Tax | Permalink | Comments (0)

More Professors Read Mean Student Evaluations

Following up on my previous post on Professors Reading Mean Student Evaluations (in the spirit of Jimmy Kimmel’s Celebrities Read Mean Tweets):  Chronicle of Higher Education, In Cheeky Pushback, Colleges Razz Rate My Professors:

Mean TweetsThe Internet can be a nasty place, as academics know well from Rate My Professors. ... Many professors assail the website and anything that might give it credence. But at least some faculty members have recently concluded that the best way to challenge the site and its unsubstantiated ratings is to mock it without mercy. ...

Jimmy Kimmel, the late-night comedy host, popularized the shtick of having people read aloud the incredibly nasty things that other people write about them online, set to “Everybody Hurts,” the plaintive tune by REM.A good example from the spot’s debut is Andy Dick, the comedian. “Oh, this one’s actually sweet,” he reads. “‘Can it be my turn to punch Andy Dick until there’s bones in his stool?’”

As much as faculty members tend to loathe Rate My Professors, comments on the website rarely approach that level of venom. Many professors simply ignore the site, while others confess to girding themselves to peek at the comments, reasoning that even the rawest feedback can offer useful information.

(Click on YouTube button on bottom right to view video directly on YouTube to avoid interruption caused by blog's refresh rate.)


September 15, 2014 in Legal Education | Permalink | Comments (0)

The IRS Scandal, Day 494

IRS Logo 2The Hill:  Rand Paul Jokes He's 'Really Worried' About Anthony Weiner:

Sen. Rand Paul (R-Ky.) poked some fun at former Rep. Anthony Weiner (D-N.Y.) over his sexting scandal on Thursday.

“How many people here have a cellphone?” Paul asked an audience in New Hampshire, according to Breitbart News. “How many people think it’s none of the government’s damn business what you have on your cellphone?”

“I’ve been thinking that’s true,” Paul continued. “But I’m really, really worried about Anthony Weiner. Because you know he likes to take his selfies, and he’s had trouble finding a place to put them where the government can’t find them. So I’m thinking maybe Anthony Weiner should put his selfie in Lois Lerner’s emails.”

New York Post:  5 Lies That Have Shaped the Obama Presidency:

3. “Not even a smidgen of corruption.”

Obama said this in response to Bill O’Reilly’s question about the IRS scandal: “You’re saying no corruption?”

If there were not even a “smidgen of corruption,” as Obama insisted, it is hard to understand what outraged him, or at least seemed to, when news of the IRS scandal first broke. “It’s inexcusable, and Americans are right to be angry about it, and I am angry about it,” Obama said in May 2013. Obama routinely expressed anger when some new scandal erupted on his watch — IRS, the failed ObamaCare website, the VA scandal, Fast and Furious — but never before had he shoved a scandal down the memory hole so quickly.

And how could Obama know there wasn’t a smidgen of corruption before the investigation was even over? Perhaps because the administration knew that any proof of that was gone with deleted e-mails and destroyed hard drives?

The Wall Street Journal Report:

Paul Gigot: New developments in the ongoing investigation into the targeting of conservatives groups by the IRS, with the tax agency revealing last week that it lost the emails of five more employees, including a senior aide to Lois Lerner, the former official at the center of the scandal. That news comes amid fresh claims by House Oversight Committee chair, Darrell Issa, that Eric Holder's Justice Department is improperly collaborating with congressional Democrats in its own IRS probe. And this time, he says he has a phone call to prove it. ...

Kim Strassel: I think what you're seeing over the past week, and especially because of the latest revelation about the Justice Department--remember, the Justice Department is supposed to be investigating this IRS scandal. And instead, what we've got as an accumulation over the last few weeks is a bunch of evidence that suggests the IRS and Justice Department and other departments of the Obama administration instead appear to have been spending the past year doing everything they possibly can to impede congressional investigators in getting to the bottom of this affair.

So not just coordinating with Democrats. We now have news about Lois Lerner's BlackBerry being wiped. This happening after Congress had already starting investigating, after the Treasury inspector general had begun his investigation. You have the emails of other critical people in this scandal gone as well, at least five of them.

You have redactions in documents that are being sent so the investigators can't actually see the core conversations. And by the way, I should also note, the only reason we even know any of this is because of outside litigation, which has enlisted the help of the judicial branch, and judicial branch has been forcing the IRS and others to come clean with some stuff. That's why we're finding out they haven't been clean with congressional investigators.

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September 15, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

TaxProf Blog Weekend Roundup

Sunday, September 14, 2014

There Are Too Many Lawyers. What's One Law School Dean to Do?

San Francisco Weekly, Schooled, Indebt, Struggling & Broke: There Are Too Many Lawyers. What's One Law School Dean to Do?:

Wu (Frank)[UC-Hastings Dean Frank] Wu is not, by most measures, a humble person. But he's definitely conspicuous. ... Wu is, by turns, an eccentric, somewhat endearing, and often polarizing figure — colleagues describe him as a "straight-shooter" with an outsized personality; critics accuse him of bluster. If there's one thing everyone can agree on, though, it's that Wu has a daunting task before him. Four years ago, he took the reins at Hastings, a prestigious institution that's been walloped by the Great Recession.

Now, Wu has a glutted workforce and a lacerated state budget to contend with as he tests new ideas in one of the most brutal legal markets in the country, trying to reverse the university's steady downward swing. Though he says he doesn't have much faith in law schools, Wu believes he can make this one work.

As recently as 10 years ago, law school was the thing you did if you'd majored in literature or philosophy and couldn't figure out how to make money. A student who clawed his way to the top of the class had a good shot at a high-paying job. But when the economy crashed, so did the legal field. Harvard and Yale graduates weren't guaranteed job offers. Big firms were paying their new hires a reduced salary to go away for a year because there was no work for them. And when the year was up, there sometimes wasn't a job to come back to.

All those problems were exacerbated for students at UC Hastings, a 136-year-old public university near Civic Center that had always prided itself on being independent — it's one of the few in the country that doesn't have to answer to a larger institution — and on nurturing a lower-income, multicultural student body. The first law school in the University of California system, it's an ancient, venerable institution in a city that no longer cares about ancient, venerable institutions. ...

State budget cuts have hobbled the university; meanwhile, to Wu's horror, law schools keep opening their doors all around the country, minting new would-be lawyers who want to settle in San Francisco and will further squeeze the city's already small legal job market.

And though law schools are ubiquitous, the worthwhile, ABA-accredited ones — places like Stanford, Boalt Hall at UC Berkeley, and Hastings — are becoming prohibitively expensive while offering no guarantee of a job.

Hastings, then, despite its well-intentioned faculty and aggressive programming — what other school has a Startup Legal Garage that teaches students how to make it on their own as lawyers in Silicon Valley? — had, just by virtue of being a law school, unwittingly become part of the problem.

Wu is the first to acknowledge that he cannot change the market. But with a little ingenuity, he can change the law school model, making it more interdisciplinary and more pragmatically job-oriented, even if that means slashing enrollment or acknowledging that some students might have to reinvent themselves as small-businesspeople. Lawyering might be an old, feudal business, but law schools won't survive if they don't adapt to the new economy, Wu says. That's the only way to keep Hastings, or any of its peers, afloat.

But Wu's first task is to transform UC Hastings in the eyes of everyone else. Right now, the school is mired in a years-long rankings slump, according to U.S. News & World Report, the oft-reviled, oft-revered site of record that rates law schools. In 1992 it was 19th among the 175 accredited law schools nationwide; when Wu arrived in 2010, it was 39th. This year: 54th.

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September 14, 2014 in Legal Education | Permalink | Comments (1)

Truthdigger of the Week: David Cay Johnston

TruthdigTruthdigger of the Week: David Cay Johnston:

Every week the Truthdig editorial staff selects a Truthdigger of the Week, a group or person worthy of recognition for speaking truth to power, breaking the story or blowing the whistle. It is not a lifetime achievement award. Rather, we’re looking for newsmakers whose actions in a given week are worth celebrating.

Since Ronald Reagan and his successors in government began restructuring the tax code, American society has become increasingly unfair. Because of wide-ranging investigative reporters like David Cay Johnston, those of us with time and concern have the opportunity to learn a little about it.

A Pulitzer Prize-winning author who has covered economic and tax matters for major newspapers and other media over the last four decades, Johnston had the cover story in Newsweek magazine in late August and early September for two weeks running. The first account detailed the serial fabulism of widely respected late celebrity biographer C. David Heymann (as well as the complicity of his publisher Simon & Schuster and its parent company CBS). The second, which makes up the substance of this article, examines some of the ways in which Congress helps major corporations and investors reap huge profits by turning tax bills into zero-interest loans subsidized multiple times over by the American taxpayer, and includes a description of how such loopholes were used to help finance the recent tax-avoidance merger of fast food chains Tim Hortons of Canada and Burger King. ...

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September 14, 2014 in Tax | Permalink | Comments (5)

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 #5.  The #1 paper is now #20 in all-time downloads among 10,292 tax papers:

  1. [2901 Downloads]  'Competitiveness' Has Nothing to Do with it, by Edward D. Kleinbard (USC)
  2. [326 Downloads]  2013 Developments in Connecticut Estate and Probate Law, by Jeffrey A. Cooper (Quinnipiac) & John R. Ivimey (Reid and Riege, Hartford)
  3. [205 Downloads]  The Futility of Tax Protester Arguments, by Allen D. Madison (South Dakota)
  4. [200 Downloads]  Public Pressure and Corporate Tax Behavior, by Scott Dyreng (Duke), Jeffrey Hoopes (Ohio State) & Jaron Wilde (Iowa)
  5. [159 Downloads]  The OECD'S Flawed and Dated Approach to Computer Servers Creating Permanent Establishments, by Monica Gianni (Florida)

September 14, 2014 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

The IRS Scandal, Day 493

IRS Logo 2The Blaze:  Lois Lerner Fallout: GOP Looks to Stop IRS Workers From Using Personal Email at Work:

The Republican House next week plans to take up three IRS-related bills, including one that would prevent all IRS officials from using their personal email while at work.

The issue has come up in the GOP investigation of former IRS employee Lois Lerner and her role in the IRS targeting scandal. Not only has the IRS said it lost more than two years’ worth of Lerner’s emails, but it has become clear that Lerner used her personal email for work purposes.

The legislation from Rep. Charles Boustany (R-La.) is just one simple line prohibiting this practice: “No officer or employee of the Internal Revenue Service may use a personal email account to conduct any official business of the government,” the bill reads.

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September 14, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Saturday, September 13, 2014

Where Are All the Law School Applicants?

Connecticut Law Tribune editorial, Where Are All the Law School Applicants?:

Nearly every law school in America is facing declining applications. Nationally, the level of applications has declined back to the level of 1976. It is clear that this drop is a problem for law schools, many of which opened or expanded over the intervening decades. What is less clear is the reason for the change, whether it is a good thing or a bad thing, and whether it is likely to reverse itself in the years ahead.


What is the reason for this dramatic reversal? Conventional wisdom credits two principal factors. First, the legal job market suffered a combined cyclical and structural downturn in 2008. ... The second factor weighing against law school applications is the growing recognition of the burden of student debt. ...

Is this drop in law school enrollment a good or bad thing? One part is arguably good: many young people applied to law school because they had good grades and board scores and wanted to keep their options open, rather than truly thinking through that a legal career was right for them. Now, in contrast, anyone applying to law school has likely given serious thought to the decision.

But the decline is also unfortunate. Unfortunate for the young people who choose not to go to law school, because they are missing what can be incredibly rewarding career. Apart from the studies about the return on investment in a law degree, the career can bring satisfaction and opportunities for growth and career changes that few other paths provide.

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September 13, 2014 in Legal Education | Permalink | Comments (10)

Clark Redux: Recovery From Accountants for Disallowed Tax Shelter Constitutes Nontaxable Recovery of Capital

In Tax Court Logo 2Cosentino v. Commissioner, T.C. Memo. 2014-186 (Sept. 11, 2014), the Tax Court followed Clark v. Commissioner, 40 B.T.A. 333 (1939), Concord Instruments Corp. v. Commissioner, T.C. Memo. 1994-248, and Rev. Rul. 57-47, 1957-1 C.B. 23, in holding that $375,000 received by the taxpayers in settlement of a lawsuit against their accountants for advising them to purchase an abusive tax shelter constituted a return of capital and did not have to be included in income:

All of the damages that petitioners alleged in the complaint were damages that they sought in order to compensate themselves for the loss that they suffered because the accountants were negligent and breached their fiduciary duties to petitioners by erroneously advising them to use the tax-avoidance plan in order to dispose of the rental property. The $375,000 payment that petitioners received in settlement of the lawsuit was to compensate them for a loss that is similar to the respective losses in Clark, Concord Instruments, and Rev. Rul. 57-47.

Update:  Forbes, Client Sues Tax Advisor For Bad Advice: Is The Settlement Payment Tax-Free?, by Tony Nitti

September 13, 2014 in Tax | Permalink | Comments (0)

Craig Boise Named to Chair at Cleveland-Marshall

Press Release:

BoiseCleveland-Marshall College of Law is pleased to announce the appointment of Dean Craig M. Boise to the Joseph C. Hostetler – Baker & Hostetler Chair in Law.  The Chair in Law was created through generous gifts from John D. Drinko, a former managing partner of the firm, and other donors, and is the first chaired professorship created at Cleveland-Marshall College of Law.

Hewitt B. Shaw, Managing Partner of BakerHostetler’s Cleveland office, said “BakerHostetler is honored to have our firm’s name closely identified with the innovative and progressive leadership demonstrated by Dean Boise.”

Dean Boise noted that BakerHostetler has been a strong supporter of Cleveland-Marshall over the years, having previously underwritten visiting professors, named professors, annual lectures, and student scholarships. “We are grateful for BakerHostetler’s many generous contributions to the law school, and I am honored to be connected to the long tradition of excellence and innovation at the firm through the Chair in Law.”

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September 13, 2014 in Legal Education, Tax, Tax Prof Moves | Permalink | Comments (0)

The IRS Scandal, Day 492

Friday, September 12, 2014

Gamage Presents Analyzing the Optimal Choice of Tax Instruments Today at UCLA

Gamage (2014)David Gamage (UC-Berkeley) presents The Case for Levying (all of) Labor-Income Taxes, Value-Added Taxes, Capital-Income Taxes, and Wealth Taxes: Applying a Framework for Analyzing the Optimal Choice of Tax Instruments, 68 Tax L. Rev. ___ (2014), at UCLA today as part of its Faculty Workshop Series:

Economic analyses of taxation have largely focused on the problems of labor-to-leisure and saving-to-spending distortions. Based on these analyses, the prior literature has generally treated labor-income and consumption taxes as being essentially equivalent, and has also treated capital-income and wealth taxes as being essentially equivalent. Further, based on these analyses, the dominant view in the prior literature has been that neither capital income nor wealth should be taxed.

This Article expands on these prior analyses by incorporating a variety of tax-gaming responses and also administrative and compliance costs. By doing so, this Article argues that it is probably optimal for governments to levy some version of (all of) labor-income taxes, value-added taxes, capital-income taxes, and wealth taxes.

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September 12, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Weekly Tax Roundup

September 12, 2014 in Tax, Weekly Tax Roundup | Permalink | Comments (0)

Weekly Legal Education Roundup

September 12, 2014 in Legal Education | Permalink | Comments (0)

Weekly SSRN Tax Roundup

September 12, 2014 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Bird-Pollan: A Check-the-Box Style Regime for Same-Sex Couples’ Tax Filing Status

Jennifer Bird-Pollan (Kentucky), Electing Fairness: A Check-the-Box Style Regime for Same-Sex Couples’ Tax Filing Status, 6 Elon L. Rev. 251 (2014):

This Essay proposes a new regulatory regime in response to the Supreme Court decision in U.S. v. Windsor, overturning Section Three of DOMA. By analogy to the check-the-box regulations, allowing a regulatory election in the face of incongruities in state law, this proposal would allow taxpayers who live in states that do not recognize same-sex marriage to elect to be treated as married for federal tax purposes. While the IRS's issuance of Rev. Rul. 2013-17 allows taxpayers who travel to a so-called "recognizing state" to have a same-sex marriage ceremony performed to be treated as married for tax purposes, there is still a requirement that those taxpayers travel to a state that has same-sex marriage before they can claim the federal tax benefits. This will be especially burdensome to low-income taxpayers, for whom the costs may be prohibitive. These same low-income taxpayers would be especially helped by the tax benefits available in certain instances to taxpayers filing jointly. The Essay considers potential objections to the proposal, and ultimately finds that the proposed regulatory regime, while hopefully only necessary for the short time (as more states enact same-sex marriage laws) will cure an inequity in the tax law.

September 12, 2014 in Scholarship, Tax | Permalink | Comments (0)

Enough Is Enough: Snakes and the Indigestibility of Lawyers

David Barnhizer (Cleveland State), Snakes and the Indigestibility of Lawyers:

Snakes 2What is occurring is not a real “crisis” for all law schools. The worst “crisis” is for debt-laden law graduates and formerly employed lawyers who are losing their jobs. Collectively, US law schools still managed to graduate 46,364 new lawyers in 2012 and 46,776 in 2013. These are interesting figures in light of Bureau of Labor Statistics projections are that there will only be a net average of 23,500 jobs per year through 2020. ...

Think of the legal profession as a boa constrictor that has swallowed a very large cow. In debating whether the radical slump that is being experienced by the American legal profession, new law graduates and US law schools is cyclical or a unique transformation, think about the legal profession’s job absorption capacity as being “the snake”. If you know how a snake digests its food you know the “meal” is swallowed whole and gradually moves down the snake’s digestive tract until consumed. Depending on the animal’s size the consumption can take a long time. The bigger the animal being relative to the size of the snake the larger and more slowly moving is the “bulge”.

In this metaphor, law graduates are “snake food”, the legal profession’s employment markets “the snake”, and law schools an apparently mindless automatic system on auto-pilot that just keeps “feeding the snake” no matter what. It’s sole limiting factor appears to be a shortage of the “applicant fuel” required to run the law school “machine”. Certainly, intelligent strategies have not flowed from the so-called processes of “faculty governance” lauded by so many of the self-interested naifs who make up law faculties. The problem is that the “meals” in the form of new law graduates have so greatly exceeded the reptile’s digestive capacity that the “snake” has only been able to ingest half the food offered and even much of that only partially.

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September 12, 2014 in Legal Education | Permalink | Comments (8)

Columbia Law Prof Is Victim of a 'Practice Audit'

Philip Hamburger (Columbia), Victim of a Practice Audit:

Audit 3Over at Instapundit, I read yesterday that the IRS defended its Breitbart audit with this statement: “The IRS stresses that audits are based on the information related to tax returns and the underlying tax law — nothing else.”

Glenn aptly writes “And who could hear this without laughing?” Actually, I know from personal experience it is false, because a while back I was subject to a “practice audit.”

It began with a notice that I was being audited for my charitable contributions. This was puzzling as my contributions were entirely in cash. To be sure, I was ashamed that they were pitifully low that year, but this made the audit all the more curious. Dutifully, I trekked up from the South Side to the federal building in downtown Chicago, and my accountant came in from out of state! ...

[The IRS man] asked some perfunctory questions and then turned to my charitable contributions. He looked at my embarrassingly low contributions, he examined my proof of having made them, and then seemed to weigh some profound question of tax law. The moment of truth had arrived.

At this point, however, I could not help myself. Being a former tax lawyer, but now being merely a client, I foolishly asked the idiotically simple question that had been bugging me all along: “Why am I being audited for cash contributions?”

The IRS man looked at us. Then, calmly and without discomfort, said, “It is a practice audit.”

Instinctively, I leaned forward and exclaimed, “WH . . . .” I never finished. My accountant, a well-built guy, was a step ahead of me. I felt his left arm pushing me back into my seat, while he said, “Thank you for sharing that. I assume then that this matter is closed.” The IRS man promptly agreed and that was that. ...

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September 12, 2014 in IRS News, Tax | Permalink | Comments (4)

Hungerford: Policy Responses to Corporate Inversions

Thomas L. Hungerford (Economic Policy Institute), Policy Responses to Corporate Inversions; Close the Barn Door Before the Horse Bolts:

This report examines some of the issues and policy options regarding corporate inversions. It explains what corporate inversions are, explores common tax features of proposed inversions, analyzes why many corporations are now pursuing inversions, and assesses various policy options to prevent inversions. The report’s main conclusions are:

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September 12, 2014 in Scholarship, Tax, Think Tank Reports | Permalink | Comments (0)

The IRS Scandal, Day 491

Thursday, September 11, 2014

September 11th Remembrance at Pepperdine


Annual Waves of Flags Display Pays Tribute to 9/11 Victims:

Seven years after the debut of the meaningful and moving tribute to the victims of the September 11 terrorist attacks, Pepperdine University continues to honor those lives lost with a stunning display of flags on the expansive lawn at Alumni Park, Malibu. Each flag, reflecting each victim's nationality, represents each of the nearly 3,000 victims of that tragic day.

The installation of the flags, which will be on display until Monday, Sept. 22, was conceived and led by the University's chapter of the College Republicans in 2008. Since that time, the display has come to be a focal point in the Malibu community to gather in remembrance and meditation of the innocent lives lost on 9/11, including Tom Burnett, alumnus of Pepperdine's Graziadio School of Business and Management. ...

As it has annually since September 2001, the Office of the Chaplain, the Department of Public Safety, and the Office of the President will host a brief memorial service at 12:15 p.m. on Thursday, Sept. 11, at the Heroes Garden, a 14,880-square-foot outdoor sanctuary that overlooks the Pacific Ocean on one of the highest bluffs on the Malibu campus. The garden serves as a public space to pause, reflect, and honor those who sacrificed their lives on 9/11, including Burnett.

Heores Garden

September 11, 2014 in Legal Education, Tax | Permalink | Comments (1)

S&P: Tax Inversions May Lead to Credit Downgrades

S&PStandard & Poor's, Inversions Lower Tax Liabilities, But Also Can Impair Credit Ratings:

Tax-driven corporate inversion strategies, in which U.S. companies seek to acquire entities in countries with lower tax rates and reincorporate overseas, account for a small but growing fraction of mergers and acquisitions (M&A) in 2014. A significant proportion of pending large inversion transactions will likely hurt credit ratings if completed. Standard & Poor's Ratings Services' view is that the credit positives of these inversions, including lower taxes and increased access to offshore cash and investments, is often outweighed by negative credit consequences, including higher leverage and the initiation of shareholder-friendly activities, which can undermine liquidity.

September 11, 2014 in Tax | Permalink | Comments (0)

Weisbach: The Use of Neutralities in International Tax Policy

David Weisbach (Chicago), The Use of Neutralities in International Tax Policy:

This paper analyzes the use of neutrality conditions, such as capital export neutrality, capital import neutrality, capital ownership neutrality, and market neutrality, in international tax policy. Neutralities are not appropriate tools for designing tax policy. They each identify a possible margin where taxation may distort business activities. Because these neutralities cannot be all satisfied simultaneously, however, they do not allow analysts to determine the appropriate trade-offs of these distortions, unlike deadweight loss measures used in other areas of tax policy. International tax policy should instead be tied directly to the reasons for taxing capital income, reasons which are derived from optimal tax or similar models.

September 11, 2014 in Scholarship, Tax | Permalink | Comments (0)

Remus Reviews Rostain & Regan's Confidence Games

ConfidenceDana A. Renus (North Carolina), Confidence Breach: A Breakdown in Professional Self-Regulation, 92 Tex. L. 1599 (2014) (reviewing Tanina Rostain (Georgetown) & Milton C. Regan, Jr. (Georgetown), Confidence Games: Lawyers, Accountants, and the Tax Shelter Crisis (MIT Press, 2014)):

At the turn of the twenty-first century, lawyers at several of the country’s most prestigious law and accounting firms participated in a fraudulent tax shelter scandal that cost the U.S. Treasury billions of dollars. It was not the first time lawyers had participated in a high-profile corporate scandal, nor would it be the last. What was unique was the extent and nature of the lawyers’ involvement. As Mitt Regan and Tanina Rostain explain in their new book, Confidence Games: Lawyers, Accountants, and the Tax Shelter Industry, “[lawyers’] fingerprints were everywhere: on the shelters they designed, the promotional materials they prepared, the client pitches they made, and the opinion letters they drafted and signed.” The resulting scandal, the authors argue, “likely represents the most serious episode of lawyer wrongdoing in the history of the American bar.”

In Confidence Games, Regan and Rostain set out to explain how and why such widespread and pervasive wrongdoing occurred. They challenge the narratives that laid blame on a finite number of bad actors and seek to offer a more comprehensive account of the actors and events that gave rise to the scandal. One of their core insights is that a complete understanding must account for institutional factors and not just individual actors. The authors focus on three factors in particular—a lax regulatory environment, a competitive global economy, and intense organizational pressures within law and accounting firms. In exploring these related causes, Regan and Rostain offer valuable insights on how the structures and cultures of the implicated law and accounting firms undermined and distorted lawyers’ professional judgment. They conclude Confidence Games with promising proposals for improving the regulation of tax practice.

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September 11, 2014 in Book Club, Scholarship, Tax | Permalink | Comments (0)

The Return of Class in American Tax Policy

Guy Charlton (City University of Hong Kong) & Peter Skilling (Auckland University of Technology), Legal and Policy Narratives and the Return of Class in American Tax Policy, 47 Creighton L. Rev. 219 (2014):

In the late 19th and early 20th centuries, tax politics were structured by a bitter class struggle. Much of this struggle revolved around the government's competence to ensure the appropriate liberty, equality of opportunity and fairness to individuals, and the use of governmental power to ameliorate social and economic problems. For much of the 20th century, however, income tax was framed in a “hegemonic logic” in which re-distributive concerns were subordinated to an assumption of the shared benefits of economic growth. This Article discusses the recent return of a class-based politics to income tax politics in the United States. Drawing on the problem definition and narrative analysis literature, it argues that despite the recent resurgence of class-based rhetoric and political action, it is unlikely that America will return to the redistributive zero-sum income tax policies advocated prior to the 1920s. The underlying premises of the historical American liberal state, as evidenced in early substantive due process decisions: liberty, equality, and a distrust of governmental authority, which suggest a continuous fear of governmental power being used to interfere with individual liberty, circumscribes the debate over tax policy and lessens its class basis.

September 11, 2014 in Scholarship, Tax | Permalink | Comments (0)

State Tax Haven Laws

Tax Analysys Logo (2013) Daniel M. Dixon, Michael A. Jacobs, Michael I. Lurie & Jack Trachtenberg (all of Reed Smith), To Blacklist or Not to Blacklist -- The Trend Toward State Tax Haven Laws, 73 State Tax Notes 635 (Sept. 8, 2014):

In this article, the authors discuss tax havens and how states are cracking down on multinational corporations that are perceived as abusing the tax laws of tax haven nations. The authors argue that both of the tax haven tests used by states -- the factor test and tax haven blacklist -- have constitutional issues.

September 11, 2014 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Student Loans, Moral Hazard, and a Law School Mess

Steven J. Harper (Northwestern), Student Loans, Moral Hazard, and a Law School Mess:

If the ability of a school’s graduates to use their legal training initially in a JD-required job is an appropriate way to measure a law school’s success, then many are unambiguous failures. For the class of 2013, 33 of 201 ABA-accredited schools placed fewer than 40 percent of their graduates in long-term full-time JD-required employment (excluding law school-funded jobs).

But here’s the kicker. Thanks to the moral hazard that the federally-backed loan program creates, some schools with the worst employment records for recent graduates have students with the highest levels of law school loan debt.

For the class of 2013, three of the top ten schools with the highest average student loan debt at graduation placed less than one-third of their graduates in full-time long-term JD-required jobs (again, excluding law school-funded positions). They were: Thomas Jefferson ($180,000 average student debt; 29 percent employment rate), Whittier ($154,000 average student debt; 27 percent employment rate), and Florida Coastal ($150,000 average student debt; 31 percent employment rate).

How do these schools and others like them accomplish this economically perverse feat? Large doses of prospective student confirmation bias combine with federally-backed student loans to create a dysfunctional market.

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September 11, 2014 in Legal Education | Permalink | Comments (3)

Fifth Circuit Denies Dow Chemical's $2 Billion Tax Shelter Deduction

DowThe Fifth Circuit yesterday disallowed $2 billion in deduction claimed by Dow Chemical in a tax shelter promoted by Goldman Sachs and King & Spalding.  Chemtech Royalty Associates v. United States, No. 13-30887 (5th Cir. Sept. 10, 2014). For more, see Reuters.

September 11, 2014 in New Cases, Tax | Permalink | Comments (0)

Collaboration Networks in Legal Scholarship

Following up on Paul H. Edelman (Vanderbilt) & Tracey E. George (Vanderbilt), Six Degrees of Cass Sunstein: Collaboration Networks in Legal Scholarship, 11 Green Bag 2d 19 (2007):  Ryan Whalen (Northwestern), Top Coauthors in Legal Academia:

The role that collaboration plays in creativity and the production of knowledge is an major focus of my recent research. As such, I’m generally interested in patterns of collaboration. ...  [T]he legal academy’s coauthorship rate appears to be much lower than most social sciences, and more comparable to those seen in the humanities.

The Thomson Reuters Web of Science indexes many legal journals, including about 100 student-edited Law Reviews. The indexing begins in 1956, and between then and now contains data on around 100,000 law review articles. I pulled metadata on all of these articles and used them to create a legal academic coauthorship network. The initial 100,000 papers listed 52,945 unique author names. I selected all the multi-authored pieces and constructed a network with links between any individuals listed as coauthors on these pieces. The result is a network with 11,474 authors, linked together quite sparsely with 12,546 coauthorship relations. ... The table below lists the top 30 collaborators and their number of coauthors. ...

These top 30 are the coauthoring superstars. The vast majority of authors didn’t coauthor at all (they’re excluded from the network) and those who did coauthor tended to only do so with one or two other authors. The diagram below shows this distribution. The x-axis here starts at 1 (because I excluded those with 0 coauthoring relationships) so you can see that over 6000 of our 11,474 authors only coauthored with one other author. The number of academic partnerships drops off quickly before reaching the maximum of 38.


September 11, 2014 in Legal Education, Scholarship | Permalink | Comments (1)

The IRS Scandal, Day 490

IRS Logo 2Commentary:  Is Eric Holder Trying to Protect the IRS?:

[I]t looks like Holder’s Department of Justice is seeking to help the IRS and the Democrats protecting the IRS. And the only reason the public knows about it is that Holder’s office accidentally called the wrong phone. Oops.

The left’s response to the IRS targeting scandal has morphed over time as more information has come to light. Mostly gone are the truthers who think nothing unethical happened or that this is an aimless witch hunt. It’s now clear to any sentient person that the IRS was indeed engaged in this targeting scheme ahead of a presidential election. Additionally, as I wrote last week, it’s since been revealed that the IRS began destroying evidence once the investigation into the targeting began.

That particular destruction of evidence concerned Lois Lerner, the former official at the center of the scandal, in order to get rid of her email correspondence. The media yawned at the revelation of the destruction of evidence, apparently tiring of this story. So the same day of Fallon’s phone call to Issa’s staff, the IRS admitted it lost the email of “five more workers who figure in the investigation into the alleged targeting of conservative nonprofit groups,” as the Wall Street Journal reported.

The Democratic response to the investigation has thus gone from the eminently silly denial that anything untoward took place to actively trying to thwart the investigation and run interference for the IRS–which, in its targeting scheme, was only following the pronouncements of high-level congressional Democrats, after all. And those Democrats have gotten quite uncomfortable with the investigation. Democratic Sen. Carl Levin has put together a report attacking the inspector general conducting the investigation.

Such interference and/or stonewalling wouldn’t be out of character for this DOJ. As the Washington Examiner reported yesterday, according to the department’s inspector general “Department of Justice senior officials have barred or delayed the inspector general there from gaining access to documents crucial to high-visibility investigations.”

The “nothing to see here” brigade has lost any semblance of credibility. In response, they’d like to make sure there’s actually nothing to see by the time investigators come looking for it.

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September 11, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Wednesday, September 10, 2014

Edwards Presents Does Earnings Lockout Make U.S. Multinationals Attractive to Acquirers? Today at Toronto

EdwardsAlex Edwards (University of Toronto, Rotman School of Management) presents Does Earnings Lockout Make U.S. Multinationals Attractive to Acquirers? at Toronto today as part of its James Hausman Tax Law and Policy Workshop Series:

The ability for deferral of home country taxation on multinationals’ foreign earnings within the U.S. tax code creates an incentive for firms to avoid or delay repatriation of earnings to the U.S. Consistent with this notion, prior research has documented a substantial lockout effect resulting from the current U.S. worldwide tax and financial reporting systems. We hypothesize and find that U.S. domiciled M&A target firms with more locked-out earnings are more attractive M&A targets for foreign bidders and are more likely to be acquired by foreign bidders, compared to domestic bidders. The effect is economically significant; a standard deviation increase in our proxy for locked-out earnings is associated with a 14% relative increase in the likelihood that an acquirer is foreign. We also examine the impact of the home country tax system of the foreign acquirers. Because multinationals facing territorial tax systems are able to shift income to save taxes to a greater extent than firms domiciled in worldwide countries, the advantages for a foreign firm acquiring a U.S. target with locked-out earnings are potentially greater when the foreign firm operates under a territorial tax system. We find that foreign acquirers of U.S. target firms with locked-out earnings are more likely to be residents of countries that use territorial tax systems.

September 10, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

More on College Rankings

It's Time to End the 'Philanthropic Gamesmanship' of Donor-Advised Funds

Following up on my previous posts (links below):  New York Review of Books, Stop the Misuse of Philanthropy!, by Lewis B. Cullman (Author, Can’t Take It With You—The Art of Making and Giving Money (2014)):

Can'tAt ninety-five, as a businessman and philanthropist, I want to call attention to little-known ploys in US philanthropy that rob our society of hundreds of millions of dollars earmarked for important charitable causes—leaving money stashed away in financial institutions and doing no good for anyone except money managers and other financial intermediaries.

In the past twenty years, I’ve given away close to $500 million of my own money. ... I saw how private foundations were able to take unfair advantages of the charitable deduction. ... But now I want to complain about a newer wrinkle that makes me even more indignant, one I deem “philanthropic gamesmanship.”

The more aggressive game in philanthropy I have in mind, one with a soothing but misleading name, is called Donor-Advised Funds (DAFs). Back in 1991, the Boston-based Fidelity Investments applied to the Brooklyn IRS and got a ruling that drastically changed the tax landscape governing charitable donations. Donors get the same tax benefits when they give to a DAF that they would get by contributing to a museum, soup kitchen, university, or any other federally accepted charity. But rather than having the gift made directly to a charity, the funds can simply sit in the account awaiting instructions from the donor. If the donor never gets around to making distributions, they stay in the account earning substantial fees for investment managers. Recently, mutual fund management companies such as Fidelity, Vanguard, and Charles Schwab have set up separate charity accounts to compete for funds.

These funds can provide such tax benefits because the donor must give up all legal control over his or her money when the transfer is made to a DAF. The control is transferred to the administrators of the DAF. ...

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September 10, 2014 in Book Club, Conferences, Tax | Permalink | Comments (1)

ABA Tax Section Releases 2014-15 Law Student Tax Challenge Problem

Lstc-14thThe ABA Tax Section has released the J.D. Problem (rules; entry form) and LL.M. Problem (rules; entry form) for the 14th Annual Law Student Tax Challenge (2014-2015):

An alternative to traditional moot court competitions, the Law Student Tax Challenge asks two-person teams of students to solve a cutting-edge and complex business problem that might arise in everyday tax practice. Teams are initially evaluated on two criteria: a memorandum to a senior partner and a letter to a client explaining the result. Based on the written work product, six teams from the J.D. Division and four teams from the LL.M. Division receive a free trip (including airfare and accommodations for two nights) to the Section of Taxation 2015 Midyear Meeting, January 29-31 in Houston, TX, where each team will defend its submission before a panel of judges consisting of the country’s top tax practitioners and government officials, including tax court judges. The competition is a great way for law students to showcase their knowledge in a real-world setting and gain valuable exposure to the tax law community. On average, more than 60 teams compete in the J.D. Division and more than 40 teams compete in the LL .M. Division. For examples of the "Best Written" winners from past competitions, please click here.


  1. Submission Deadline: November 7, 2014
  2. Notification of Semifinalists and Finalists: December 19, 2014
  3. Semifinal and Final Oral Defense Rounds: January 30, 2015 in Houston, TX

September 10, 2014 in ABA Tax Section, Legal Education, Tax, Tax Analysts, Teaching | Permalink | Comments (0)

How Much of a Writer's (or Blogger's) Income is Subject to the 3.8% Investment Income Tax?

Forbes:  Tax Thriller: Best Selling Crime Writer Karin Slaughter Versus The IRS, by Janet Novack:

BlindsidedSince her first crime thriller, Blindsighted, became a bestseller in 2001, Karin Slaughter’s books have sold more than 30 million copies  and earned her tens of millions in royalties.  Now, the 43-year-old Atlanta writer has a new and fearsome antagonist: the Internal Revenue Service. ...

But the biggest dollar issue and the most intriguing legal one in both cases is this: for nearly six decades, the IRS has held (see Revenue Rulings 55-385 and 68-498) that 100% of book royalties received by an active writer (as opposed to one who is no longer in the writing biz) is self-employment income subject to Social Security and Medicare taxes. (The IRS has taken a similarly hard line in its internal audit guides for entertainers and musicians, saying royalties they receive are all for services rendered and subject to self-employment taxes, according to Claudia Hill, a Cupertino, Cal. tax pro and Forbes contributor.) ...

That IRS position became a much bigger deal for best selling authors and other celebrities after 1993, when Congress removed the cap on the amount of self-employment earnings subject to the 2.9% Medicare levy. (The Social Security tax is still imposed on only a fixed amount of wages or net self-employment income–$117,000 in 2014.) Since then, successful self employed folks have looked for ways to move earnings off of Schedule C, which reports profit and loss from a sole proprietorship i.e. self employment income. One ploy, used by former House Speaker and President candidate Newt Gingrich, among others, is to form an S corporation (which pays no corporate tax, but passes all of its income and losses through to its owners’ personal tax return) and then write a book, deliver speeches and otherwise earn income as an employee of that corporation, classifying most of the S corp’s earnings as profits, not compensation for services.  Not surprisingly, the IRS often challenges such accounting, arguing more of the profits should be treated as pay subject to Social Security and Medicare taxes. ...

Slaughter and her tax advisers, for their part,  reduced the Medicare bite by reporting the bulk of her book income on Schedule E as “Royalties” instead of on Schedule C as self-employment income. In the new suit they argue that this is proper because most of  the millions she receives are for use of “her name, her image, intellectual property rights, fan base, and other assets, and not for services rendered.”

In 2008, Slaughter originally assigned just 18% of her $4.6 million in book income to her Schedule C and put the rest on Schedule E.  In 2010 and 2011, she put only  16% and 26% of her book royalties, respectively, on Schedule C.  In all cases, IRS auditors said 100% of her royalties belonged on Scheduled  C. For 2008 alone, they demanded  nearly $116,000 more in self employment tax. ...

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September 10, 2014 | Permalink | Comments (0)

Tax Prof Moves, 2014-15

Moves VAP Hire

  • Julian Fray (Boston University Tax LL.M.) to Northeastern

Entry Level Hires

  • Tessa Davis (VAP, Tulane) to South Carolina
  • Erin Scharff (VAP, NYU) to Arizona State
  • Bernard Schneider (Tax LL.M., NYU) to Queen Mary University of London

Lateral Moves

Promotions, Tenures, Chairs, and Professorships

  • Jordan Barry (San Diego) to Professor of Law with Tenure
  • Jennifer Bird-Pollan (Kentucky) to James and Mary Lassiter Associate Professor of Law with Tenure
  • Craig Boise (Dean. Cleveland-Marshall) to Baker & Hostetler Chair in Law
  • Sam Brunson (Loyola-Chicago) to Associate Professor of Law with Tenure
  • Roger Colinvaux (Catholic) to Professor of Law with Tenure
  • Rebecca Kysar (Brooklyn) to Professor of Law with Tenure
  • Shu-Yi Oei (Tulane) to Hoffman F. Fuller Associate Professor of Tax Law with Tenure
  • Bret Wells (Houston) to Associate Professor of Law with Tenure

Administrative Appointments


  • Jennifer Bird-Pollan (Kentucky) to Vienna University (Fulbright) (2014-15)
  • John Brooks (Georgetown) to Columbia (Spring 2015)
  • Danshera Cords (Albany) to Pittsburgh (2014-16)
  • Cliff Fleming (BYU) to Vienna University (Oct. 2013), Central European University (Apr. 2015)
  • David Herzig (Valparaiso) to Louisville (2014-15)
  • Tracey Kaye (Seton Hall) to University of Luxembourg (Fulbright) (Fall 2014)
  • Michelle Kwon (Tennessee) to SMU (Fall 2014)
  • John Miller (Idaho) to UC-Hastings (Spring 2015)
  • Ann Murphy (Gonzaga) to Shanghai University (Fulbright) (2014-15)
  • Shu-Yi Oei (Tulane) to UC-Hastings (Fall 2014)
  • Gregg Polsky (North Carolina) to Duke (2014-15)
  • James Puckett (Penn State) to Alabama (Fall 2014)
  • Tracey Roberts to UC-Hastings (2014-16)
  • David Schizer (Columbia) to Georgetown (Spring 2015)
  • Michael Simkovic (Seton Hall) to North Carolina (Fall 2014), Fordham (Spring 2015)
  • Larry Zelenak (Duke) to Northwestern (2014-15)


  • Ron Chester (New England)
  • Joseph Dodge (Florida State)
  • Ron Pearlman (Georgetown)
  • Gail Richmond (Nova)
  • Dan Schneider (Northern Illinois)
  • Bill Turnier (North Carolina)

For prior years' Tax Prof Moves, see:

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September 10, 2014 in Legal Education, Tax, Tax Prof Moves | Permalink | Comments (1)

The U.S. Virgin Islands: A Made-in-America Offshore Tax Haven

NewsweekNewsweek:  A Made-in-America Offshore Tax Haven, by Lynnley Browning:

Each month, millions of Americans send a check to Ocwen Financial Corp., a little-known giant in the lucrative if unglamorous business of processing and servicing home mortgages.

Handling loan payments, modifying soured mortgages and foreclosing on borrowers is a profitable line of work. But Ocwen’s success has been turbocharged by its subsidiaries in an unlikely offshore tax haven: the United States Virgin Islands. It is a slice of paradise that some experts consider the nation’s one and only, officially sanctioned, full-blown offshore tax shelter.

Tax shelters are perfectly legal and certainly commonplace, but the recent merger of Burger King and Tim Hortons, the Canadian coffee and doughnut chain, has sparked public anger about U.S. companies lowering their tax bills by moving profits abroad. What’s lost in the debate, however, is that Congress—both directly and indirectly—not only tolerates but actually encourages corporations to take advantage of these arrangements. And that’s especially true if the tax haven in question is an American territory.

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September 10, 2014 in Tax | Permalink | Comments (1)

The Ivy League Is Broken and Only Standardized Tests Can Fix It

The New Republic:   The Trouble With Harvard: The Ivy League Is Broken and Only Standardized Tests Can Fix It, by Steven Pinker (Harvard):

Ivy League (2014)It’s not surprising that William Deresiewicz’s Don’t Send Your Kid to the Ivy League has touched a nerve. Admission to the Ivies is increasingly seen as the bottleneck to a pipeline that feeds a trickle of young adults into the remaining lucrative sectors of our financialized, winner-take-all economy. And their capricious and opaque criteria have set off an arms race of credential mongering that is immiserating the teenagers and parents (in practice, mostly mothers) of the upper middle class.

Deresiewicz writes engagingly about the wacky ways of elite university admissions, and he deserves credit for opening a debate on policies which have been shrouded in Victorian daintiness and bureaucratic obfuscation. Unfortunately, his article is a poor foundation for diagnosing and treating the illness. Long on dogmatic assertion and short on objective analysis, the article is driven by a literarism which exalts bohemian authenticity over worldly success and analytical brainpower. And his grapeshot inflicts a lot of collateral damage while sparing the biggest pachyderms in the parlor. ...

But the biggest problem is that the advice in Deresiewicz’s title is perversely wrongheaded. If your kid has survived the application ordeal and has been offered a place at an elite university, don’t punish her for the irrationalities of a system she did nothing to create; by all means send her there! The economist Caroline Hoxby has shown that selective universities spend twenty times more on student instruction, support, and facilities than less selective ones, while their students pay for a much smaller fraction of it, thanks to gifts to the college. Because of these advantages, it’s the selective institutions that are the real bargains in the university marketplace. Holding qualifications constant, graduates of a selective university are more likely to graduate on time, will tend to find a more desirable spouse, and will earn 20 percent more than those of less selective universities—every year for the rest of their working lives. These advantages swamp any differences in tuition and other expenses, which in any case are often lower than those of less selective schools because of more generous need-based financial aid. The Ivy admissions sweepstakes may be irrational, but the parents and teenagers who clamber to win it are not. ...

At the admissions end, it’s common knowledge that Harvard selects at most 10 percent (some say 5 percent) of its students on the basis of academic merit. At an orientation session for new faculty, we were told that Harvard “wants to train the future leaders of the world, not the future academics of the world,” and that “We want to read about our student in Newsweek 20 years hence” (prompting the woman next to me to mutter, “Like the Unabomer”). The rest are selected “holistically,” based also on participation in athletics, the arts, charity, activism, travel, and, we inferred (Not in front of the children!), race, donations, and legacy status (since anything can be hidden behind the holistic fig leaf). ...

Jerome Karabel has unearthed a damning paper trail showing that in the first half of the twentieth century, holistic admissions were explicitly engineered to cap the number of Jewish students. Ron Unz, in an exposé even more scathing than Deresiewicz’s, has assembled impressive circumstantial evidence that the same thing is happening today with Asians. ...

Knowing how our students are selected, I should not have been surprised when I discovered how they treat their educational windfall once they get here. A few weeks into every semester, I face a lecture hall that is half-empty, despite the fact that I am repeatedly voted a Harvard Yearbook Favorite Professor, that the lectures are not video-recorded, and that they are the only source of certain material that will be on the exam. I don’t take it personally; it’s common knowledge that Harvard students stay away from lectures in droves, burning a fifty-dollar bill from their parents’ wallets every time they do. Obviously they’re not slackers; the reason is that they are crazy-busy. Since they’re not punching a clock at Safeway or picking up kids at day-care, what could they be doing that is more important than learning in class? The answer is that they are consumed by the same kinds of extracurricular activities that got them here in the first place. ..

What would it take to fix this wasteful and unjust system? Let’s daydream for a moment. If only we had some way to divine the suitability of a student for an elite education, without ethnic bias, undeserved advantages to the wealthy, or pointless gaming of the system. If only we had some way to match jobs with candidates that was not distorted by the halo of prestige. A sample of behavior that could be gathered quickly and cheaply, assessed objectively, and double-checked for its ability to predict the qualities we value….

We do have this magic measuring stick, of course: it’s called standardized testing.

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September 10, 2014 in Legal Education | Permalink | Comments (6)

Call for Tax Papers: Akron Law Review

AkronFrom Rich Lavoie:  The Akron Law Review is seeking tax articles for its annual tax issue (formerly the  stand-alone Akron Tax Journal).  For more information or to submit an article, contact Nathaniel Tucker.

September 10, 2014 in Scholarship, Tax | Permalink | Comments (0)