Friday, November 17, 2023
Sarah Lawsky (Northwestern; Google Scholar) presents Picturing Capital Gains and Losses at Boston College today as part of its Tax Policy Collaborative hosted by James Repetti and Diane Ring:
Formalized statutes become susceptible to a particular kind of formalized reasoning, which can in turn lead to insights about and highlight connections implicit in the statute but obscured by the statute’s complexity. The article focuses, as an example, on reasoning with formalizations of Internal Revenue Code sections related to capital gains and losses. Formalizing these sections reveals an error in the statute that has been generally overlooked by leading treatises and casebooks. Reasoning with formalizations makes it straightforward to show that IRS has corrected this error in its forms and worksheets implementing this law. Moreover, reasoning with formalizations shows that while the IRS forms and worksheets present facially different algorithms than those dictated by the statute, the algorithms the IRS presents are generally faithful to the statute—-and actually improve upon the statute by making technical corrections that are inconsistent with the statute’s (incorrect) language and consistent with the statute’s intent.
The article also uses formalizations to motivate a graphical presentation of the capital gain and loss statutes. This article thus puts forth formalization, and reasoning with formalizations, as one possible tool that can be used to understand the tax law. Reasoning with formalization can be concise and persuasive. Reasoning with formalizations takes using examples to explain the law a step further, reasoning about the structure of the law instead of just specific instances and providing justifications for outcomes. Moreover, while reasoning on formalizations can be usefully done by humans, reasoning just like the reasoning in this article can be done computationally if the operations to be implemented are sufficiently specified. This article thus also provides a way to understand one advantage of computationally accessible law.