Paul L. Caron
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Saturday, December 16, 2006

Colonoscopy: A Rawlsian Perspective

Jack Bogdanski (Lewis & Clark) passed along this hilarious clip of Lou Rawls performing a colonoscopy on Damon Wayans:

December 16, 2006 in Celebrity Tax Lore | Permalink | Comments (2) | TrackBack (0)

Spotlight_1_1

The Boston University Graduate Tax Program, established in 1959 as one of the first graduate tax programs in the nation, continues to be one of the best. It consistently ranks among the Top 10 tax programs. The program offers a broad and diverse curriculum, with five required courses and 33 electives and concentrations in three areas:

        • Business Tax
        • Estate Planning
        • International Tax   

Bu_logo_finalIn this five part series, TaxProf Blog will profile Boston University's full-time Graduate Tax Faculty.

 

Feld_1 A member of the faculty since 1971, Alan L. Feld has testified before a number of congressional committees on issues surrounding tax laws. Before coming to Boston University, he practiced tax and corporate law at two New York firms: Barrett Knapp Smith & Schapiro and Paul, Weiss, Rifkind, Wharton & Garrison.

   

Continue reading

December 16, 2006 in Tax Prof Spotlight | Permalink | Comments (0) | TrackBack (0)

NY Times: Fallout from KPMG Tax Shelter Case

Interesting article in today's New York Times:  Judge’s Rebuke Prompts New Rules for Prosecutors, by Lynnley Browning:

It was a ruling that sent shudders through the Justice Department. Judge Lewis A. Kaplan of the Federal District Court in Manhattan in June issued a scathing criticism of the prosecution’s tactics in a criminal case against former tax professionals of the accounting firm KPMG. The government, the judge said, “let its zeal get in the way of its judgment.” For one, the judge cited the prosecutors’ pledge earlier in the case that they would examine “under a microscope” whether KPMG was paying the legal fees of the defendants. KPMG ultimately refused to pay the defendants’ legal expenses, he wrote “because the government held the proverbial gun to its head.”...

Continue reading

December 16, 2006 in News | Permalink | Comments (0) | TrackBack (0)

District Court Enjoins Marketer of Phony Health Care Reimbursement Plans

Doj_14The Department of Justice announced yesterday that the federal district court in Chicago has permanently enjoined two men from marketing their phony health care reimbursement account scheme:

The court found that defendants made numerous false statements in promoting the plans and improperly administered them. For example, materials supplied to employees as part of defendants’ plans listed “athletic shoes,” “electrolysis,” “health club fees,” “soaps,” and “day care” as reimbursable expenses. The court noted that expenses such as these are reimbursable as health care expenses only in rare circumstances. Moreover, the court found that the defendants often reimbursed medical expenses without substantiating them.

United States v. Zanfei, No. 04-C-2703 (N.D. IL)

December 16, 2006 in New Cases | Permalink | Comments (0) | TrackBack (0)

Beck on Deductibility of Treble Damages Paid for Breach of National Health Service Corps Scholarship Contracts

Beck_2Richard Beck (New York Law School) has published Deductibility of Treble Damages Paid for Breach of National Health Service Corps Scholarship Contracts: The Misuse of I.R.C. § 265(a)(1) in Stroud v. United States and of the Origin of the Claim Test in Keane v. Commissioner, 1 Charleston L. Rev. 1 (2006).  Here is the abstract:

A deduction for treble damages paid for breach of the taxpayer's National Health Service Corps medical service obligation was erroneously denied under § 265(a)(1) in Stroud v. United States, 906 F. Supp. 990 (1995). The provision does not apply because taxpayer's damages were not a cost of earning a tax-exempt scholarship which had been received many years earlier, but rather a deductible cost of buying out one employment obligation in order to earn taxable income in another. The history of IRC § 265(a)(1) is analyzed and criticized. In Keane v. Commissioner, 75 T.C.M. 2046 (1998), the taxpayer's deduction for current interest on a note for damages for breach of an NHSC scholarship contract was erroneously denied (as in Stroud as well). The note was not for a student loan, as the court stated, but for deductible damages as in Stroud. The origin of the government's claim for damages was not the scholarship awarded in the remote past, but rather the more proximate breach of the scholarship contract. The origin of the claim doctrine is analyzed as it applies to two possible origins in the past. Also, both courts are criticized for overlooking the only relevant issue as to deductibility of the interest, namely, whether the physicians were employees or self-employed. The rule that employee business interest is personal and nondeductible is analyzed and criticized.

December 16, 2006 in Scholarship | Permalink | Comments (0) | TrackBack (0)

Friday, December 15, 2006

14 of 15 New York Law Schools Improve Bar Passage Results

The New York Law Journal reports that 14 of New York's 15 law schools improved their performance on the July 2006 bar exam:  only Cornell suffered a decline in the percentage of first-time takers who passed the exam:

Nysba_1

Due to especially dramatic increases at Touro Law Center and City University of New York School of Law - for several consecutive years the two lowest-scoring schools - Hofstra University School of Law shifted from a 12th place ranking in 2005 to last place this year, despite a two-point rise in its ratio of successful first-time exam-takers.

December 15, 2006 in Law School | Permalink | Comments (0) | TrackBack (0)

UN Study of Global Wealth Inequality

The UN has published a fascinating report on global wealth inequality:  The World Distribution of Household Wealth, by James B. Davies (University of Western Ontario), Susanna Sandstrom (World Institute for Development Economics Research, United Nations University), Anthony Shorrocks (World Institute for Development Economics Research, United Nations University), & Edward N. Wolff (NYU).  Among the many interesting findings of the report are:

  • The richest 1% of adults own 40% of the world's assets
  • The richest 2% of adults own 50% of the world's assets
  • The richest 10% of adults own 85% of the world's assets

The report contains interesting data on the distribution of this wealth across countries:

Chart_1_3

Chart_2_6 

Chart_3

Gary Becker and Richard Posner debate the implications of the UN study.  (Hat Tip:  Ann Murphy.)

December 15, 2006 in Think Tank Reports | Permalink | Comments (0) | TrackBack (0)

GW-IRS Annual International Tax Institute Concludes Today

GwirsThe two-day 19th Annual Institute on Current Issues in International Taxation, sponsored by George Washington and the IRS, concludes today:

The [Institute] presents a unique opportunity for attendees to hear high-level IRS and Treasury Department officials, as well as high-level foreign officials from different tax authorities, address current international tax issues and offer perspectives on trends and developments. Panels are designed to enable specialists from the IRS and the Treasury Department to interact with leading private sector tax professionals and representatives of corporate tax departments.

For the impressive array of speakers and their topics, see here.

December 15, 2006 in Tax Conferences | Permalink | Comments (0) | TrackBack (0)

IRS to Sell Income Tax Stats by Zip Code

Irs_logo_329 The IRS announced today that it will sell individual income tax return statistics by zip code for $25 per state or $500 for the entire United States:

Statistics from a study covering individual income tax returns classified by zip code and size of adjusted gross income are now available for purchase. The tables include the number of returns filed, number of exemptions, adjusted gross income, salaries and wages, taxable interest, dividends, net capital gains, net profit from Schedule C and F, adjustments to income for payments made to an IRA and Self-employed pensions, total itemized deductions, including charitable contributions deductions, and taxes paid deductions, the alternative minimum tax, income tax before credits, total tax, earned income credit as well as the number of returns prepared by paid preparers. Statistics are based on addresses shown on the returns when filed with IRS.

To see a sample from one zip code (from North Dakota), click here.  (in prior years, the IRS made this information available for free.)

December 15, 2006 in IRS News | Permalink | Comments (0) | TrackBack (0)

Colonoscopy Rankings

At the risk of having to change our name to ColonoscopyProf Blog (see here and here), this New York Times article caught my eye:  Study Questions Colonoscopy Effectiveness, by Gina Kolata:

[A] new study (Colonoscopic Withdrawal Times and Adenoma Detection during Screening Colonoscopy) published today in The New England Journal of Medicine ... of 12 highly experienced board-certified gastroenterologists in private practice, found some were 10 times better than others at finding adenomas, the polyps that can turn into cancer. One factor distinguishing the physicians who found many adenomas from those who found few was the amount of time spent examining the colon, according to the study, in which the gastroenterologists kept track of the time for each exam and how many polyps they found. They discovered that those who slowed down and took their time found more polyps....

[Y]ou will see people who take 2 or 3 minutes and people who take 20 minutes to examine a colon. Insurers pay doctors the same no matter how much time they spend. Gastroenterologists say colonoscopies can help prevent colon cancer, but warn that there is a pressing need for better quality control. Still, the experts say, the onus remains on patients to ask for data on how proficient their doctors are.

By the time I need another colonoscopy, I hope they will have developed publicly accessible gastroentologist rankings.

December 15, 2006 in News | Permalink | Comments (1) | TrackBack (0)

NY Times: Why Selecting a College is Like Buying a Car

Interesting New York Times series on the cost of college, which details the surge in applications that colleges experience when they raise their tuition ("if a college costs more, it must be better"), as well as colleges' growing use of discounts from the "sticker price" through increased financial aid and the compression of pricing across colleges.

(Hat Tip:  Ann Murphy.)

December 15, 2006 in News | Permalink | Comments (1) | TrackBack (0)

Bloomberg News Flash: The Rich Buy Tax-Free Bonds

My nominee for non-news story of the day:  Say This About the Rich -- They Love Tax-Free Bonds, by Joe Mysak:

The new IRS Statistics of Income Bulletin is here, and you're in it. The appearance of this quarterly is always eagerly anticipated, because it shows just who buys municipal bonds. And the answer is: The rich! The fall edition of the IRS classic unpacks the numbers: ... the higher up you go in terms of adjusted gross income, the more people there are who appreciate tax-exempt income and preservation of capital. It's uncanny, almost unnerving.

December 15, 2006 in News | Permalink | Comments (0) | TrackBack (0)

Tulane Seeks Tax Visitor for Fall 2007

Tulane_11 Tulane Law School is seeking a visitor for Fall 2007 to teach Federal income Tax and one additional tax course.  For further information, or to apply for the position, email Stephen M. Griffin, Vice Dean of Academic Affairs  and Rutledge C. Clement, Jr. Professor in Constitutional Law.

December 15, 2006 in Tax Prof Moves | Permalink | Comments (0) | TrackBack (0)

Google Lists 633 Tax Patents

Joint Tax Committee Releases Two Reports

Bluebook_14 The Joint Committee on Taxation has released two reports:

This document ... provides an analysis of the macroeconomic effects of a proposal to modify the individual income tax by broadening the tax base and reducing statutory tax rates. In particular, the proposal would eliminate exemptions and reduce deductions and credits. It would reduce tax rates and repeal the AMT. The proposal is approximately revenue neutral as measured by the conventional revenue estimate over the current 10-year budget window.

This document ... describes a new model developed by the Joint Committee staff for use in analyzing how changes in tax policy may affect the nation’s economy. In analyzing the macroeconomic effects of tax policy proposals, the Joint Committee staff uses several different models to account for the sensitivity of the analysis to different modeling assumptions. Three of these models, the Joint Committee macroeconomic equilibrium growth model (“MEG”), the overlapping generations lifecycle model (“OLG”), and the Global Insight econometric model (“GI”) have been described in other Joint Committee staff documents. The Joint Committee staff has recently begun using an additional model, a dynamic stochastic general equilibrium neoclassical growth model with infinitely lived agents (“DSGE”). The Joint Committee staff welcomes comment on this model.

December 15, 2006 in Gov't Reports | Permalink | Comments (0) | TrackBack (0)

Thursday, December 14, 2006

TIGTA Releases Semi-Annual Report to Congress

Tigta_1The Treasury Inspector General for Tax Administration has released its Semi-Annual Report to Congress, covering the April 1, 2006 - September 30, 2006 period.  Here is part of the inspector General's Message to Congress:

I am proud of our accomplishments and pleased to present TIGTA’s Semiannual Report to Congress. Once again, TIGTA has excelled in its effort to ensure the integrity and fairness of the Federal tax system. This report highlights our most notable audit and investigative work conducted from April 1, 2006, through September 30, 2006, and summarizes the statistical results of our work. Over the last six months, TIGTA has completed 118 audits that identified more than $258 million in total cost savings and $1.4 billion in increased or protected revenue. In addition, TIGTA’s Office of Chief Counsel has reviewed and made recommendations on the impact of 177 proposed or existing regulations and laws affecting tax administration.

December 14, 2006 in Gov't Reports | Permalink | Comments (0) | TrackBack (0)

Solomon, Four Others Sworn Into Treasury Posts

Treasury_4 The Treasury Department has issued a press release (HP-195) on the five Treasury nominees sworn in this week:

  • Robert F. Hoyt, as General Counsel
  • Phillip L. Swagel, as Assistant Secretary for Economic Policy
  • Anthony W. Ryan, as Assistant Secretary for Financial Markets
  • Eric Solomon, as Assistant Secretary for Tax Policy
  • Michele A. Davis as Assistant Secretary for Public Affairs

As Assistant Secretary for Tax Policy, Solomon has supervisory responsibility for providing the Secretary of the Treasury with policy analysis, advice and recommendations relating to all aspects of domestic and international issues of federal taxation, including all legislative proposals, regulatory guidance, and tax treaties. His office is also responsible for providing the official estimates of all government receipts for the President's budget, fiscal policy decisions, and Treasury cash management decisions. Solomon joined Treasury in October of 1999. Since 2001 he has served as the Deputy Assistant Secretary for Regulatory Affairs. He has also held the position of Acting Deputy Assistant Secretary for Tax Policy since December 2004. Previously, Solomon was a partner at Ernst & Young. Before joining Ernst & Young, Solomon served at the IRS for five years as Assistant Chief Counsel (Corporate), heading the IRS legal division with responsibility for all corporate tax issues.

December 14, 2006 in IRS News | Permalink | Comments (0) | TrackBack (0)

How Harvard Recruits Students

From our sister Leiter's Law School Reports, an apparently serious student recruitment video from the Harvard Economics Department, followed by a funny student version:

December 14, 2006 in Law School | Permalink | Comments (1) | TrackBack (0)

IRS Offers Year-End Charitable Donation Tips

Irs_logo_328 The IRS  today released Recent Tax Law Changes May Affect People Giving to Charity: IRS Offers Tips for Year-End Donations (IR-2006-192):

Individuals and businesses making contributions to charity should keep in mind several important tax law changes made last summer by the Pension Protection Act. The new law offers older owners of individual retirement accounts a new way to give to charity. It also includes rules designed to provide both taxpayers and the government greater certainty in determining what may be deducted as a charitable contribution....

To help taxpayers plan their holiday-season and year-end donations, the IRS offers the following additional reminders....

December 14, 2006 in IRS News | Permalink | Comments (0) | TrackBack (0)

Technology Test for Law Professors

Mike Madison asks:  What technologies — if any — should every law professor be expected to know and use competently in 2007? Here’s a preliminary, incomplete list of possible candidates:

  • Reading/writing basics: Office suite (MS Office, OpenOffice — pick one or some other) (text editor, slideware, spreadsheet, database, HTML editor)
  • Communications/publishing/group work basics: Email, IM, blogware, groupware (such as Groove)
  • Scholarship tools: Bibliographic software, statistics software
  • Virtual worlds technologies
  • Peer-to-peer tools

December 14, 2006 in Law School | Permalink | Comments (1) | TrackBack (0)

Final Tax Extenders Legislative Text

The full 557-page text of the final version of H.R. 6111, The Tax Relief and Health Care Act of 2006, as passed by the House and Senate on December 9, is available here.

December 14, 2006 in Congressional News | Permalink | Comments (0) | TrackBack (0)

Reynolds: Income Inequality Is Not Increasing

Reynolds_1Interesting op-ed in today's Wall Street Journal:  The Top 1% . . . of What?, by Alan Reynolds (Cato Institute):

As many others have done, Virginia's Democratic Senator-elect Jim Webb recently complained on this page of an "ever-widening divide" in America, claiming "the top 1% now takes in an astounding 16% of national income, up from 8% in 1980." ... Yet the statement is clearly false. The top 1% of households never received anything remotely approaching 16% of personal income (national income includes corporate profits)....

The architects of these estimates, Thomas Piketty of École Normale Supérieure in Paris and Emmanuel Saez of the University of California at Berkeley, did not refer to shares of total income but to shares of income reported on individual income tax returns -- a very different thing. They estimate that the top 1% (1.3 million) of taxpayers accounted for 16.1% of reported income in 2004. But they explicitly exclude Social Security and other transfer payments, which make up a large and growing share of total income: 14.7% of personal income in 2004, up from 9.3% in 1980. Besides, not everyone files a tax return, not all income is taxable (e.g., municipal bonds), and not every taxpayer tells the complete truth about his or her income.

For such reasons, personal income in 2004 was $3.3 trillion, or 34.4%, larger than the amount included in the denominator of the Piketty-Saez ratio of top incomes to total incomes. Because that gap has widened from 30.5% in 1988, the increasingly gigantic understatement of total income contributes to an illusory increase in the top 1%'s exaggerated share....

[The shifting of income from the corporate income tax system to the individual tax system through S Corps and LLCs] has exaggerated the growth of top incomes, while excluding a third of personal income (including transfer payments) has exaggerated the top groups' income share....

In a forthcoming Cato Institute paper I survey a wide range of official and academic statistics, finding no clear trend toward increased inequality after 1988 in the distribution of disposable income, consumption, wages or wealth. The incessantly repeated claim that income inequality has widened dramatically over the past 20 years is founded entirely on these seriously flawed and greatly misunderstood estimates of the top 1%'s alleged share of something-or-other.

December 14, 2006 in News | Permalink | Comments (2) | TrackBack (0)

Cornia & Walters on Full Disclosure: Controlling Property Tax Increases During Periods of Increasing Housing Values

Ntj_logo_3Gary C. Cornia (Marriott School of Management, Brigham Young University) & Lawrence C. Walters (School of Public Policy, George Mason University) have published Full Disclosure: Controlling Property Tax Increases During Periods of Increasing Housing Values , 59 Nat'l Tax J. 735 (2006).  Here is the abstract:

This paper examines the outcome of a non–binding full disclosure process to control increases in the property tax. The data used in the study cover a 20–plus–year period in five MSAs in Utah. During the period of our analysis, metro areas in Utah experienced rapid increases in the market value of residential housing. The results of our analysis suggest that local assessors in Utah captured this increased value in their appraisal and reappraisal processes. However, our results also demonstrate that the effective property tax rate did not keep pace with increases in assessed property values,implying that a non–binding full disclosure law did limit growth in the property tax. Furthermore, it limited the property tax while avoiding some of the unintended consequences imposed by binding property tax limitations.

December 14, 2006 in Scholarship | Permalink | Comments (0) | TrackBack (0)

The First MoneyBall Law School?

LouisvilleMy MoneyLaw boss Jim Chen (Minnesota) has been named dean at the Louis D. Brandeis School of Law at the University of Louisville.  From the press release:

“I’m looking forward to helping the school extend the Brandeis legacy 150 years after his birth,“ Chen said, noting that one of many attractions to the post is the law school’s tradition of public service. “I also look forward to engaging the work of the Brandeis School of Law with that of the legal profession and with that of the academy — in law and in other disciplines. I hope that the School of Law will play a leading role in helping the law accomplish those things that law is best equipped to do: avoid conflicts, resolve them when they arise, build productive organizations and, ultimately, solve social problems.” Chen will begin his duties Jan. 2 by representing UofL at several out-of-town events. He expects to be on campus Jan. 16.

Jim has written passionately about legal education at MoneyLaw, and his hiring suggests that the law school takes seriously its motto:  "Dare To Be Great."  (Hat Tip:  our sister Leiter's Law School Reports.)

December 14, 2006 in Law School | Permalink | Comments (0) | TrackBack (0)

WaPo: 520 Favors Added to Tax Bill

Interesting article in today's Washington Post:  520 Breaks for Select Companies Added to Tax Bill, by Joe Stephens:

A huge tax bill that Congress passed last week contained a little-noticed gift for select corporations -- tens of millions of dollars in breaks on import tariffs. Early Saturday morning, in the frantic final hours of the 109th Congress, lawmakers rolled 520 tariff suspensions into the must-pass bill. The provisions will reduce or eliminate taxes on imported products as varied as shoes, camcorders and boiled oysters.

December 14, 2006 in News | Permalink | Comments (0) | TrackBack (0)

Cincinnati Awards Three Named Professorships

Kudos to my three colleagues, Joseph Biancalana, Barbara Black, and Rafael Gely, who have been selected by our Dean Lou Bilionis for three named professorships.  From the Cincinnati press release:

“We are fortunate to have this opportunity to honor three of our most accomplished senior faculty, each with an outstanding national reputation” said Louis Bilionis, dean of the College of Law. “These individuals exemplify our faculty’s dedication to excellent research, publishing, teaching, and service.” The professorship appointments are for an initial five-year term.

Binky_1

Joseph Biancalana has been named Judge Joseph P. Kinneary Professor of Law. A member of the faculty since 1983, Joseph teaches Property, Wills, Trusts & Estates, and English Legal History.  His recent publications include:

   

Black_1 Barbara Black, Director of the Corporate Law Center, has been named Charles Hartsock Professor of Law. Prior to joining the Cincinnati faculty in 2006, Barbara taught at Pace Law School, where she also served as Vice Dean and Interim Dean.  She was Deputy Director of the AALS in 1994-96.  Barbara teaches Corporations and Securities Regulation.  Her recent publications include:

Gely Rafael Gely has been named Judge Joseph P. Kinneary Professor of Law. Prior to joining the Cincinnati faculty in 2000, Rafael taught at Texas A&M business school and Chicago-Kent law school.  He teaches Contracts and Labor Law.  His recent publications include:

December 14, 2006 in Law School | Permalink | Comments (0) | TrackBack (1)

SOI Publishes Statistics of Income Bulletin

Irs_logo_321 The Statistics of Income Division has published the Fall 2006 Statistics of Income Bulletin (Publication 1136) (pdf) with six articles and one data release:

  • Individual Income Tax Returns for 2004
  • Integrated Business Data for 2003
  • Partnership Returns for 2004
  • Private Foundations for 2003
  • Charities and Other Tax-Exempt Organizations for 2003
  • Tax-Exempt Bonds for 2003 and 2004
  • Corporate Foreign Tax Credit for 2002

December 14, 2006 in IRS News | Permalink | Comments (0) | TrackBack (0)

Guide to Grading Law School Exams

Check out Dan Solove's funny Guide to Grading Law School Exams, which endorses this tried-and-true method:

Examgrade

December 14, 2006 in Law School | Permalink | Comments (0) | TrackBack (0)

ABA Tax Section Offers Teleconference & Webcast Today on The New Tax Shelter Disclosure Rules

Aba_tax_11The ABA Tax Section offers a teleconference and webcast today on The New Tax Shelter Disclosure Rules: What You Need to Know Now from 1:00 - 2:30 p.m. EST:

On November 1, 2006, the Treasury Department and the IRS issued proposed amendments to the tax shelter disclosure regulations for taxpayers and material advisors. The current regulations were issued prior to the American Jobs Creation Act of 2004, which imposed significant new penalties on taxpayers and advisors who fail to disclose reportable transactions. The Act also created a new accuracy-related penalty for many reportable transactions, along with more stringent penalty defense rules.

Although the proposed tax shelter disclosure regulations retain the basic structure and rules of the existing regulations, the Treasury and the IRS are proposing a number of important changes, including the creation of a new "transactions of interest" category of reportable transactions. Other changes include the targeting of tax result insurance; the elimination of the lease transaction exception; the announcement of a new disclosure form for material advisors; and the clarification of the list-maintenance rules for material advisors. Our distinguished government panelists had primary responsibility for these new regulations. They will discuss these changes and what they mean for taxpayers and their advisors.

Faculty:

  • Julian Kim (Latham & Watkins, Washington, D.C.)
  • William P. O'Shea (Associate Chief Counsel (Passthroughs and Special Industries), IRS Office of Chief Counsel)
  • Anita Soucy (Office of Tax Policy, U.S. Treasury Department)
  • Donna Marie Young (Special Counsel to Associate Chief Counsel (Passthroughs and Special Industries), IRS Office of Chief Counsel)

December 14, 2006 in ABA Tax Section | Permalink | Comments (0) | TrackBack (0)

Wednesday, December 13, 2006

College Student Gets Mother-in-Law to Co-Sign $10,000 Loan to Buy Apple Computer, Has $7,800 DOI Income When He Repays Only $2,200 After Taking High-Paying Job at Microsoft

Tax_court_3 Interesting Tax Court decision released this afternoon:  Schachner v. Commissioner, T.C. Summ. Op. 2006-188:  Husband attended a local community college and borrowed $10,030 from the school to buy an Apple computer.  At his request, his Mother-in-Law applied for the loan on his behalf, and both signed the note and agreed to be jointly and severally liable.  Husband and Wife later filed for bankruptcy.  Although the outstanding $7,800 balance on the loan was not discharged in the bankruptcy proceeding, it was written off by the lender.  The Tax Court upheld the Service's characterization of the $7,800 as discharge of indebtedness income, and noted in a footnote:

The Court finds it worth noting that, although he never finished his degree, Mr. Schachner has been employed with Microsoft Corp. since 1999 and earns a substantial salary, no doubt due in part to this education.

Two questions:

  1. How in the world did an Apple computer cost $10,000?
  2. How did Husband convince Mother-in-Law to co-sign the note?

December 13, 2006 in New Cases | Permalink | Comments (1) | TrackBack (0)

Democrats Pick Orszag to Head CBO

OrszagPeter R. Orszag, Joseph A. Pechman Senior Fellow and Deputy Director of The Brookings institution, has been nominated by incoming Senate Budget Committee Chairman Kent Conrad (D-ND) to head the Congressional Budget Office (CBO), which provides cost estimates for non-tax legislation and issues budget and economic forecasts and analyses.  If approved in January by House and Senate leaders, Orszag would serve a four-year term. He would replace Acting CBO Director Donald Marron

From Sen. Conrad's press release:

Conrad is making his recommendation after consulting with incoming House Budget Committee Chairman John Spratt (D-SC), current Senate Budget Committee Chairman Judd Gregg (R-NH), and the incoming House Budget Committee Ranking Member Paul Ryan (R-WI). Dr. Orszag was among three finalists interviewed Monday by Conrad, Spratt, Ryan, and a representative from Gregg’s office.

Press coverage:

Update:  Dan Shavairo (NYU) applauds the appointment.

December 13, 2006 in Gov't Reports | Permalink | Comments (0) | TrackBack (0)

Impact of McNulty Memo on KPMG Tax Shelter Case

December 13, 2006 in News | Permalink | Comments (0) | TrackBack (0)

D'Amato: Why Interdisciplinarity Is Bad for Legal Education

DamatoAnthony D'Amato (Northwestern) has posted The Interdisciplinary Turn in Legal Education on bepress.  Here is the abstract:

The nature of law and legal practice is changing with the addition of interdisciplinary scholars to law-school faculties and interdisciplinary studies to the law curriculum. However, the accessibility of non-law disciplinarians in the rest of the university raises the question of the cost-effectiveness and opportunity costs of importing them directly into the law school. This Article criticizes the interdisciplinary turn on three grounds. First is the unlikelihood that the joint-degreed persons who join the law faculty will happen to be the ones that their colleagues will end up collaborating with. Second is the even greater unlikelihood that any given discipline can communicate usefully with another discipline. Third is the opportunity-cost factor: that the new interdisciplinary courses will crowd out an essential part of the legal discipline, namely, an understanding of the foundations and dialectical evolution of its forms of language.

For further discussion, see:

December 13, 2006 in Law School, Scholarship | Permalink | Comments (0) | TrackBack (0)

WSJ Tax Articles

Interesting tax articles in today's Wall Street Journal:

The year-end tax bill that cleared Congress promises long-awaited relief to taxpayers who exercised incentive stock options during the high-tech boom and became ensnared by the alternative minimum tax, even as their investments plummeted.

Europe's highest court handed the U.K. government an important, if partial, victory in two cases concerning multinational companies such as British American Tobacco PLC and Sony Corp. The Luxembourg-based European Court of Justice is playing a critical role in deciding how multinational companies should be taxed across the borders of the European Union's 25 member states. Tax lawyers said the two cases underline that the court is shifting more toward governments than taxpayers on tax issues.

In one ruling, the court rejected claims by Sony, along with Pirelli & C SpA, Essilor International SA and BMW AG, against the different tax treatment of dividends paid by U.K.-based companies to parent firms resident elsewhere. All four companies have subsidiaries in the U.K., while the parent firm is resident in another country.

In the other case, which involves BAT, the court insisted on some modifications to a U.K. rule that taxes dividends paid by nonresident subsidiaries of U.K. firms. Subsidiaries resident within the country aren't subject to the same tax.

Congress has resurrected several popular tax breaks that expired last year. But because lawmakers took so long to act, the changes won't appear on federal income-tax forms and instructions that millions of people will be receiving in coming weeks.

December 13, 2006 in News | Permalink | Comments (0) | TrackBack (0)

ABA Tax Section Submits Comments on Proposed Regulations under § 7216

Aba_tax_33 The ABA Tax Section has submitted comments to the IRS on Proposed Regulations under § 7216 (12/11/06).  Here is the Executive Summary:

These Comments address Proposed Regulations relating to the rules regarding the disclosure and use of tax return information by tax return preparers. The Proposed Regulations provide guidelines for tax return preparers using or disclosing information obtained in the process of preparing income tax returns.

The ABA's Section of Taxation commends the IRS for its extensive efforts to strengthen the protection of taxpayers’ rights against unauthorized disclosure of their sensitive tax return information. In particular, the Section applauds the IRS for recognizing and addressing the specific disclosure and use concerns raised by the increased and pervasive use of electronic technology.

Continue reading

December 13, 2006 in ABA Tax Section | Permalink | Comments (0) | TrackBack (0)

Foundation Press Publishes Contracts Stories, Sixteenth Book in Law Stories Series

Contracts_stories_2Foundation Press has published Contracts Stories, edited by Douglas G. Baird (Chicago):

In this appealing Stories offering, the editors are joined by other leading contracts scholars in taking the major cases in contract law -- from Britton v. Turner to Red Owl to Pro-CD to Baby M -- and putting them in their historical and cultural context. This volume brings together a broad array of contracts scholars. Each of the eleven short and readily accessible chapters provides newly uncovered facts about and insights into the cases that lie at the core of the first-year contracts class. Long-standing puzzles are answered (such as the identity of Louise Hamer and why the nephew transferred his claim to her after his uncle died in Hamer v. Sidway and why a bridge to nowhere was built in Luten Bridge). These answers in turn are linked to the larger political and social forces at work, and the way these forces have shaped the evolution of contract law.

For further information about Contracts Stories, see:

Other titles in the Law Stories Series (for which I serve as Series Editor) are:

December 13, 2006 in Book Club | Permalink | Comments (0) | TrackBack (0)

Mason on Yesterday's ECJ's Test Claimants Decision

Ecj Ruth Mason (Connecticut) comments on an important case decided yesterday by the European Court of Justice:

An important decision (with implications for U.S.-EU tax treaties) was handed down by the ECJ yesterday: Test Claimants in Class IV of the ACT Group Litigation (C-367/04) (12/12/06):  (1) an EU Member State granting relief for economic double taxation to resident shareholders of domestic companies need not also grant that relief to shareholder resident in other EU Member States, and (2) limitations on benefits provisions in double tax treaties are not contrary to EC law.

The second ruling is more relevant for U.S. readers. Because LOB provisions deny treaty benefits based on the country of residence of the ultimate owners of conduit entities, many scholars questioned whether LOBs were consonant with EC law, which prohibits tax discrimination on the basis of nationality. [See Ruth Mason, U.S. Tax Treaty Policy and the European Court of Justice, 59 Tax L. Rev. 65 (2005).]  Without much reasoning, the Court of Justice held that LOBs do not violate EC law. The crux of the Court's reasoning seems to be that two taxpayers are not comparable if they are beneficiaries of different tax treaties (or if one is a treaty beneficiary and the other is not). Under EC law, if two taxpayers are not comparable, then taxing them differently is not discrimination.

The good news for Treasury is that it appears that LOB clauses in U.S. double tax treaties with EU countries are off the chopping block. This ruling was not much of a surprise after the Advocate General's advisory opinion in the case and the Court's previous ruling in Case C-376/03, D (holding that EC law does not impose a tax treaty most-favored-nation obligation with respect to double tax treaties).

U.S. readers interested in the LOB issue should focus on paragraphs 75-94.

December 13, 2006 in New Cases | Permalink | Comments (0) | TrackBack (0)

IRS Issues Katrina Regs

Katrina_2 The IRS has issued proposed and temporary regulations (REG-152043-05, T.D. 9301) allowing taxpayers to claim tax breaks if they provide housing to Hurricane Katrina victims. The Katrina Emergency Tax Relief Act lets taxpayers reduce their taxable income by $500 if they provide free housing in their principal place of residence to a Hurricane Katrina displaced person.

December 13, 2006 in IRS News | Permalink | Comments (0) | TrackBack (0)

Tuesday, December 12, 2006

Law School Branding

Interesting article in the Wall Street Journal:  How to Keep Your School From Being Brand X, by Ronald Alsop:

Every business school must think more seriously than ever about its brand identity, as competition for students intensifies in a crowded market of look-alike M.B.A. programs. Many schools boast talented marketing professors and place their graduates in brand-management jobs. Yet most schools have failed to develop a resonant brand image of their own. While they may well have distinctive cultures and academic strengths, they usually play up their media rankings and frequently use the same buzzwords, such as "global" and "entrepreneurial." "It's death if you don't differentiate yourself in this competitive market," says Steve Salbu, the new dean of the Georgia Institute of Technology's College of Management in Atlanta....

Indiana University's Kelley School of Business also is trying to distinguish itself from competitors more effectively. Daniel Smith, Kelley's dean and a marketing professor himself, believes promoting M.B.A. programs requires a much different approach from selling mass-market products and services. "When you have an experience product like an M.B.A. program, the customer's risk is high because you can't test drive multiple schools and you can't change your mind once you make your purchasing decision," he explains. "That makes the brand extremely important as a trust mark that helps to reduce the customer's risk."

December 12, 2006 in Law School | Permalink | Comments (0) | TrackBack (0)

WSJ: Tax Consequences of Backdated Stock Options

Wsj_1 New evidence suggests that corporate executives may have found another way to manipulate their stock options, this time to cheat on their income taxes. In a paper that began circulating in recent days, a SEC economist concludes there is strong statistical evidence that executives manipulated the exercise dates of their options as part of a tax dodge. And a review of corporate filings turns up some companies with startling options-exercise patterns.

The tax dodge related to options, however, almost certainly involves fewer executives than are caught up in the furor over the backdating of grants. (see related article [below]) The reason it can be tempting to backdate the exercise of options lies in the way the IRS treats different types of income for tax purposes.

Options, a common part of executive pay packages, give the recipient the right to buy a company's stock at a fixed price in the future. That price, known as the strike price, is usually the stock's market price on the day the options were granted. About three-quarters of the time, executives immediately sell the shares they buy when they exercise options. Under IRS rules that typically apply, those executives must pay ordinary income tax, as well as payroll taxes, on the difference between the stock's value on the date the option was exercised and the option's strike price. The highest federal marginal income tax rate is 35%. But for a variety of reasons, including corporate rules that require top managers to own a certain amount of stock, some executives don't sell immediately. Those who hold the shares for at least a year pay a much lower capital-gains tax -- currently 15% -- on any profit between the time they exercise and when they eventually dispose of the shares. That lower rate gives the executive an incentive to exercise the options at a relative low point for the stock: The move reduces the amount of money that would be owed at the ordinary income tax rate, and shifts the difference so it is potentially taxed at the much-lower capital gains rate.

Many of the hundred-plus companies under investigation over backdated stock options -- and the individuals who received those options -- are scrambling to protect themselves from another potential consequence: stiff tax bills. For individuals, the tax bill and penalties could prove steep, even if the shares become worthless. Companies, too, could face a hefty bill and potential penalties for unpaid income and payroll taxes....

Ordinarily, top executives owe income taxes on any gains from exercising their options at the time of exercise. Lower-level employees often receive another kind of stock option that is typically taxed only when the underlying shares are actually sold (although they can be taxed sooner under the Alternative Minimum Tax). But under tax rules for deferred compensation adopted in 2004, improperly priced options of either kind can trigger a 20% surtax on top of ordinary income tax -- totaling as much as 60% of any gain, once state and local taxes are taken into account.

Moreover, under the 2004 rules, the taxes and penalties come due in the year an executive is first allowed to exercise the options -- in other words, when the options vest -- even if he or she exercises them later. Tax experts say taxes are still due if the option subsequently loses value before exercise or even goes unexercised. In addition, more taxes are due if the underlying shares continue to gain value before the options are exercised. (On the flip side, options that expire while under water can't be used to offset other taxable income, tax experts say.) The IRS also charges penalty interest -- currently about 9% -- for late payment.

Update:  Linda Beale (Wayne State) has more here.

December 12, 2006 in News | Permalink | Comments (0) | TrackBack (0)

Bloomberg: The ISO AMT Partial Fix

Interesting article today on Bloomberg: Workers Whose Stock Options Left Them in Debt to Get a Break, by Ryan J. Donmoyer:

Thousands of Internet and technology workers who ended up owing large tax debts from exercising stock options instead of becoming multimillionaires will get some of their money back under legislation Congress passed last week. The measure, backed by companies such as Intel Corp. and Texas Instruments Inc., was adopted as part of a broader $38 billion tax measure approved by Congress on Dec. 9. It would help end a phenomenon in which workers paid the government almost $1.7 billion in taxes on stock they didn't sell. These workers owed taxes even if their shares lost value, as many did in the decline of U.S. stock markets from 2000 to 2002. The new law would refund the taxes over five years in many cases.

December 12, 2006 in News | Permalink | Comments (2) | TrackBack (0)

Tax Articles in Forbes

Interesting tax articles in this month's Forbes:

Bill Clinton took a deduction for his underwear, and now we're all paying the price. Read this before you make any more charitable contributions

The estate tax is here to stay. But you might not have to worry about it, if you dish out assets ahead of time.

(Hat Tip:  Tim Zinnecker.)

December 12, 2006 in News | Permalink | Comments (0) | TrackBack (0)

WSJ: Trader Tax Status

Interesting article in today's Wall Street Journal:  Trader Tax Status Holds Benefits if You Qualify, by Arden Dale:

If you're a serious stock trader, you may be eligible to get a serious tax break. For those who qualify, so-called trader tax treatment can be a real boon: They are able to deduct extra expenses and, even better, can elect to write off all trading losses. Not everyone who trades a lot is eligible, however, and trader tax status is considered complicated and controversial, even among certified public accountants. ...

Trader tax status was created by the Taxpayer Relief Act of 1997, near the height of day-trading mania.... Trader tax status has two main benefits: First, it allows more business-expense write-offs. A regular investor gets limited expense deductions, while traders get an almost unlimited number. Second, trader tax status lets some people write off all trading losses by choosing to use "mark-to-market" accounting. In mark-to-market accounting, a trader calculates the worth of his securities based on their market value at the end of the year. If the stock has gone down in value, he may report a loss without actually selling it. Conversely, if the stock has gone up, he must report a gain."

December 12, 2006 in News | Permalink | Comments (1) | TrackBack (0)

Giertz on The Property Tax Bound

Giertz Ntj_logo_3J. Fred Giertz (Department of Economics, University of Illinois at Urbana-Champaign) has published The Property Tax Bound, 59 Nat'l Tax J. 695 (2006).  Here is the abstract:

In most states, the property tax departs markedly from the ideal of a low–rate, broad–based tax that treats various types of real property uniformly. Recently, many states have responded to rapidly rising residential property values with new constraints such as assessment caps. This paper will review property tax performance and analyze several arguments relating to alleged deficiencies of the property tax. The analysis suggests that the property tax has performed well by most measures and that it ranks high in terms of both stability and revenue elasticity. The restrictions and constraints imposed on the property tax are likely the result of the pursuit of political objectives by decision makers and not the result of structural problems with the tax itself.

December 12, 2006 in Scholarship | Permalink | Comments (0) | TrackBack (1)

Studying for Law School Exams

December 12, 2006 in Law School | Permalink | Comments (0) | TrackBack (0)

Syracuse Tax Prof Martin Fried Retires

Fried_2 Syracuse Tax Prof Martin L. Fried has retired.  From the press release:

After nearly 40 years, Professor Martin L. Fried taught his last class on Dec. 7 at Syracuse University College of Law.

Fried joined the College of Law as an associate professor in 1968.... Prior to joining the College of Law, he was in private practice in New York City. He also taught at Washington University, the University of Iowa, and the University of Cincinnati.

During his professional career, he wrote Taxation of Securities Transactions and numerous articles on tax and trusts and estates. [For his full publication list, see here.]  He is the Crandall Melvin Professor of Wills & Trusts Professor. Professor Fried taught courses in federal income taxation, trusts and estates, and property.

In May 2006, he became Of Counsel at Hancock & Estabrook LLP in Syracuse, NY where he is a member of the tax, and trusts and estates practice groups.

December 12, 2006 in Tax Prof Moves | Permalink | Comments (0) | TrackBack (1)

Schlunk on Rationalizing Reorganizations and Other Corporate Acquisitions

Schlunk_3 Ssrn_187Herwig J. Schlunk (Vanderbilt) has posted Rationalizing Reorganizations and Other Corporate Acquisitions on SSRN.  Here is the abstract:

This paper examines the taxation of human shareholders in the case of mergers and acquisitions. The relevant law is currently extraordinarily complex, utterly inconsistent, and in many instances arguably unfair. There are really only two plausible ways to cure these ills. The first, to move to a tax system with more fulsome gain recognition, ultimately probably in the form of mark-to-market taxation, is not in my opinion feasible (either technically or what is perhaps more important politically). Accordingly, the second, to move to a tax system with less gain recognition merits attention.

In this paper, I propose such a tax system. In particular, under my proposal, a human shareholder whose stock is sold or exchanged pursuant to a merger or acquisition would be entitled to nonrecognition treatment so long as either (1) he receives stock in the acquiring corporation or (2) he involuntarily receives consideration other than stock in the acquiring corporation but promptly and appropriately reinvests such consideration.

December 12, 2006 in Scholarship | Permalink | Comments (0) | TrackBack (0)

Elkins on Interest-Free Loans in the U.S. & Israel

Elkins_1David Elkins (Netanya College School of Law, Israel) has published Unfinished Symphony:  A Comparison of the Tax Treatment of Interest-Free Loans from Corporations to Their Shareholders in the United States and Israel, 40 Int'l Law. 667 (2006).  Here is the abstract:

Traditional principles of income taxation have proven remarkably ineffective in developing an appropriate model for the taxation of interest-free loans from corporations to their shareholders. The article describes the struggles of both the American and the Israeli courts to contend with the tax issues arising from such situations. I posit that the root of the problem could be traced to the fact that traditional principles of taxation do not consider a corporation which loans money to its shareholders interest-free to have earned any income. Unlike the case of a barter transaction, in the corporation-shareholder context there is, in fact, no interest, either in cash or in kind, which the corporation receives in exchange for allowing shareholders the use of its funds. Eventually Congress had to step in and remove the primary impediment to reaching an acceptable solution by providing that the corporation be taxed on the interest it could have received. Israel also might eventually need such a legislative solution.

December 12, 2006 in Scholarship | Permalink | Comments (0) | TrackBack (0)

Monday, December 11, 2006

SOI Releases Two Tax Reports

Irs_logo_321 The Statistics of Income Division has released two reports:

Nine tables presenting statistics for Split-Interest Trust Information Returns (Form 5227) filed in 2005 are now available. The tables include statistics for the number of returns, income, accumulations, distributions, and asset values. The statistics are classified by type of entity.

IRS Document 6186 contains multi-year projections of the number of tax returns to be filed with the IRS by the calendar year of filing. The publication includes detailed projections by approximately 50 different individual, business and tax-exempt return types such as Form 1040, Form 1120, Form 941 and Form 990. There is also additional detail by medium of filing (paper versus electronic) and by IRS processing campus location.

December 11, 2006 in IRS News | Permalink | Comments (0) | TrackBack (0)

Camp on Reforming the Law of Erroneous Refunds

Ssrn_188Camp_6Following up on last week's post on the USA Today story, How the IRS Failed to Stop $200M in Bogus RefundsBryan Camp (Texas Tech) has posted Reforming the Law of Erroneous Refunds.  Here is the abstract:

In FY2005, the IRS refunded about $227.6 billion to individual taxpayers. Given the huge amounts involved, even small error rates add up. For example, even if the IRS had an error rate of just 1% that would mean $2.2 billion erroneous refunds in FY2005. USA Today recently reported that the IRS let slip at least $200 million erroneous refunds from just the failure of one computer program during FY2005. While USA Today thought this a tradgedy, it is just slippage in the institutional gears.

The true tragedy is that current law renders the IRS impotent to collect erroneous refunds. When asked by the media how the IRS was going to collect the $200 million erroneous refunds that came to light, USA Today reported that Commissioner Everson said there was “little chance IRS will collect the bulk of the erroneously issued checks.” As a result, tens of thousands of taxpayers receive the government's unintended largesse and wallow in their windfalls. This is bad tax administration that no number of TIGTA reports can fix.

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December 11, 2006 in Scholarship | Permalink | Comments (0) | TrackBack (1)