Paul L. Caron

Tuesday, July 27, 2010

New Issue of Journal of Taxation of Investments

J Tax'n Investments The Journal of Taxation of Investments has published its Summer 2010 issue (Vol. 27, No. 4), with these articles:
  • Walter Schwidetzky (Baltimore) & Rolfe Eicke (Ernst & Young), Income Taxation in the United States and Germany: The Rugged Individualist Meets the Social Activist, 27 J. Tax'n Inv. 3 (Summer 2010):  "Different countries find different solutions to raising revenues and taxing their citizens. The United States rarely looks outside of its own borders for answers. Yet other countries may have looked at a given issue and come up with intelligent answers that could helpfully inform U.S. decisions. The converse is, of course, also the case. One of the striking things about doing comparative tax analysis is how differently, but legitimately, different countries can answer the same question. There also times when one country’s answer is demonstrably superior to that of another country. This article, which will be continued in the next issue of the Journal, compares German and U.S. income taxation of individuals, primarily individuals who are employees or self-employed professionals. Part 1 of this article provides some relevant background information on the German and U.S. legal systems; discusses the relevant constitutional issues, including the impact of decisions of the European Court of Justice on German tax law; reviews overarching doctrines that apply to the two tax systems. Part 2, which will appear in the next issue of the Journal, will explain and analyze how the two countries get to taxable income, including a review of how each country taxes investments."
  • Nicholas C. Lynch (Georgia Southern) & Charles R. Pryor (Western Illinois), Cost Segregation Studies: A Tax-Saving Tool All Practitioners Should Be Ready to Offer, 27 J. Tax'n Inv. 27 (Summer 2010):  "During periods of recession, when credit may be unavailable for making needed working capital improvements, companies constantly look for alternative means to increase their operating cash flow. A cost segregation study (CSS) is a valuable tool that can enable a qualifying taxpayer to realize significant increases in cash flow and tax savings over multiple periods. Any taxpayer in possession of residential or non-residential depreciable property that was purchased, constructed, inherited, or improved after 1986 may qualify for a CSS. This article provides a detailed analysis of a cost segregation study, including discussions of which types of taxpayers qualify for a CSS and which costs may be classified as Section 1245 property versus Section 1250 property, an explanation of how a CSS should be performed, and a detailed analysis of the many tax advantages that a CSS offers. It also includes an in-depth discussion of the technical layout of the various methods of conducting a CSS as well as the many ways to increase a study’s overall return."
  • Leon Gabinet (Case Western), Same-Sex Divorce: DOMA and the Internal Revenue Code, 27 J. Tax'n Inv. 45 (Summer 2010):  "At the present time, same-sex marriage is permitted in six states, while civil unions or domestic partnerships are permitted in five others. In the near future, other states will probably follow suit and enact civil union or domestic partnership legislation. Despite differences in nomenclature, same-sex marriage, civil union, and domestic registered partnership laws uniformly provide that their participants are to be treated as spouses for all state law purposes. They thus bear the same burdens and they enjoy the same benefits as spouses in a traditional heterosexual marriage. This article examines one aspect of the problem—the tax issues which will inevitably arise when participating couples in same-sex unions are divorced or legally separated. It is still too early to tell whether same-sex marriage or civil union will result in the same rate of divorce as is the case in heterosexual marriages. But surely there will be divorces, separations and, where there are children, support and custody issues. As in the case of traditional marriages, the local divorce courts will be called upon to order alimony or spousal support payments, the division of property, and support of children adopted or born into the same-sex union."
  • Michael McGowan & Andrew Howard (both of Sullivan & Cromwell, New York), Ongoing Uncertainty Regarding Entity Classification for U.K. Tax Purposes: Swift v HMRC, 27 J. Tax'n Inv. 77 (Summer 2010):  "The question as to whether a non-U.K. entity such as a Delaware limited liability company (LLC) should be treated as transparent or opaque for U.K. tax purposes can make a significant difference to the amount and timing of tax incurred by a U.K. taxpayer investing in it. The U.K. tax tribunal in Swift v HMRC, a recent first-instance decision, came to the conclusion that a Delaware LLC should be treated as transparent for U.K. foreign tax credit purposes. In so doing, it avoided economic double taxation. However, the decision is surprising because it had previously been thought that in most cases a LLC would be treated as opaque. The LLC in this case does not seem to have had any particularly unusual features. The decision itself may be appealed but it illustrates the uncertain tax treatment that a U.K. investor in an LLC will face and provides a discussion of the issues that need to be considered in resolving that uncertainty. There is also a longstanding question as to whether an LLC can disrupt a U.K. tax group and the decision is relevant to this. This article sets out some of the issues that a U.K. taxpayer considering an investment in an LLC will need to consider by reference to the decision in this case. U.K. taxpayers face similar issues when considering investment in other non-U.K. entities that are not clearly equivalent to English companies."

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