Paul L. Caron

Thursday, January 31, 2019

U.S. v. Davis And Prof. Cain’s Rewritten Opinion: An Intersectional Argument For Capping Section 1041

Diane Klein (La Verne), U.S. v. Davis and Prof. Cain’s Rewritten Opinion: An Intersectional Argument for Capping Section 1041:

Tax cases are about rich people. Given the demographic distribution of income and wealth in the United States, that means tax cases are mostly about rich White people. The tax issue in Davis can be stated simply: when shall transfers of appreciated assets incident to divorce be taxed? But thinking about these rules only from the point of view of the taxpayers themselves, and what is “fair” inter se or as compared to others similarly situated, may distract us from seeing broader issues also properly considered in tax policy. When we take into account not just sex/gender and marital status, but also race and class, the focus on one sort of inequality (between divorcing couples in different states) obscures another that is larger and more far-reaching (race-based wealth inequality). To address this, I suggest an amendment to Section 1041, a limit on tax-free transfers of appreciated assets incident to divorce. 

The cap is intended to balance desirable flexibility and asset preservation at divorce with legitimate fiscal and equity concerns in what at least aspires to be a progressive tax system.

Scholarship, Tax | Permalink


Well, there are several countermeasures that come to mind to avoid a tax on marital distributions:
Divide the property prior to divorce.......separate, but don't get divorced.... don't get married in the first place... use your life time gift and estate tax exclusion to transfer the property.....and those are just the ones that occurred to me in the first 30 seconds of thinking about this. Also, and a CPA with a practice emphasis in Divorce Tax Matters, I can just about guarantee if you eliminate section 1041, you will see the high earning spouse weaponize the tax code to hammer down the low income spouse into reduced property settlements and support payments.

Posted by: David Ellis | Feb 4, 2019 12:09:35 PM

Will the intersectional socialists never stop creating new ways to levy taxes and soak the rich?

"Transfers" incident to divorce are better thought of as an allocation of property already owned by the (ex) spouses. As long as the tax law treats a married couple as a single unit, then allocating property amongst themselves when the unit dissolves should not be considered a taxable transfer, no matter how rich they are. Envy is not a good basis for policy change.

Posted by: Todd | Feb 1, 2019 10:40:49 AM