Paul L. Caron
Dean




Monday, January 25, 2021

Lesson From The Tax Court: No Deduction For Disguised Dividends

Tax Court (2020)A lesson that comes up often in my tax class is how economic substance trumps transactional form.  One common example is when a corporate taxpayer seeks to deduct payments that seem to be compensation payments.  Sometimes, however, not all is what it seems and the corporation is really distributing corporate profits rather than incurring a corporate expense.

In last week’s case of Aspro, Inc. v. Commissioner, T.C. Memo. 2021-8 (Jan. 21, 2021), Judge Pugh’s clear and crisp opinion teaches us how the Court decides whether compensation payments are really disguised dividends, a lesson we can use to help clients avoid the mess that this taxpayer got into.

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January 25, 2021 in Bryan Camp, New Cases, Scholarship, Tax, Tax Practice And Procedure, Tax Scholarship | Permalink

TaxProf Blog Weekend Roundup

Sunday, January 24, 2021

God At The Inauguration

Wall Street Journal op-ed:  God at the Inauguration, by Tevi Troy (presidential historian) & Stuart Halpern (Yeshiva University):

Presidential inaugural addresses are unpredictable, but it’s a good bet that they will refer to the Bible. President Biden did, quoting Psalm 30:5: “Weeping may endure for a night, but joy cometh in the morning.” This is part of a welcome, long-running trend toward more religious language in public life.

Mr. Biden has cited Psalm 30 in speeches before, and it seems particularly apt in these dark times. Mr. Biden also encouraged his fellow Americans to “open our souls instead of hardening our hearts,” an allusion to God hardening Pharaoh’s heart, beginning with Exodus 7:13.

With these references, 27 out of 45 presidents have cited the Bible in their inaugural addresses, making a total of 64 biblical references. Forty-four came from the Hebrew Bible and 20 from the New Testament. John F. Kennedy, the only Catholic president before Mr. Biden, made the most allusions in one speech, with five. ...

The tradition of biblical allusions in inaugural addresses dates back to the beginning of the Republic, when George Washington made an argument for them. In his first inaugural, Washington referred to Psalm 82. “It would be peculiarly improper,” he said, “to omit in this official act my fervent supplications to that Almighty Being who rules over the universe, who presides in the councils of the nations.” ...

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January 24, 2021 in Legal Education, Tax | Permalink

The Top Five New Tax Papers

This week's list of the Top 5 Recent Tax Paper Downloads is the same as last week's list. The #1 paper is #462 among 15,670 tax papers in all-time downloads:

  1. SSRN Logo (2018) [927 Downloads]  A Simple Regulatory Fix for Citizenship Taxation, by John Richardson, Laura Snyder & Karen Alpert (Queensland)
  2. [525 Downloads]  Tax Treaty Negotiations: Myth and Reality, by Yariv Brauner (Florida)
  3. [300 Downloads]  Is It Time to Eliminate Federal Corporate Income Taxes?, by Edward Lane (Albany) & Randall Wray (UMKC)
  4. [270 Downloads]  What May We Expect of a Theory of International Tax Justice?, by Dirk Broekhuijsen (Leiden) & Henk Vording (Leiden)
  5. [202 Downloads]  5 Lessons on Profit Shifting From U.S. Country-by-Country Data, by Kimberly Clausing (UCLA)

January 24, 2021 in Scholarship, Tax, Tax Scholarship, Top 5 Downloads | Permalink

Saturday, January 23, 2021

This Week's Ten Most Popular TaxProf Blog Posts

NY Times: Biden Wants To Raise Taxes, Yet Many Trump Tax Cuts Are Here To Stay

New York Times, Biden Wants to Raise Taxes, Yet Many Trump Tax Cuts Are Here to Stay:

Donald J. Trump has left the White House. But many of his signature tax cuts aren’t going anywhere.

Democrats have spent years promising to repeal the 2017 Tax Cuts and Jobs Act, which Republicans passed without a single Democratic vote and was estimated to cost nearly $2 trillion over a decade. President Biden said during a presidential debate in September that he was “going to eliminate the Trump tax cuts.”

Mr. Biden is now in the White House, and his party controls both chambers of Congress. Yet he and his aides are committing to only a partial rollback of the law, with their focus on provisions that help corporations and the very rich. It’s a position that Mr. Biden held throughout the campaign, and that he clarified in the September debate by promising to only partly repeal a corporate rate cut.

In some cases, including tax cuts that help lower- and middle-class Americans, they are looking to make Mr. Trump’s temporary tax cuts permanent.

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January 23, 2021 in Tax, Tax News | Permalink

David Kamin (NYU), Other Law Profs Answer President Biden's Call To Public Service

Karen Sloan (Law.com), From Campus to DC: These Law Profs Are Answering Biden's Call:

Kamin (2021)The Biden administration is still in its infancy, but a number of law professors have already joined the new team in Washington, D.C., with more likely on the way. ... Here are some of the professors who have been appointed to posts within the Biden Administration: ...

David Kamin, New York University School of Law—Kamin is taking a public service leave from NYU’s law faculty to become deputy director of the National Economic Council in the White House. Kamin is an expert budget and tax policy and worked in the Obama administration before joining the law school in 2012.

January 23, 2021 in Legal Ed News, Legal Education, Tax, Tax News | Permalink

Friday, January 22, 2021

Weekly SSRN Tax Article Review And Roundup: Layser Reviews Lederman's Valuation As A Challenge For Tax Administration

This week, Michelle Layser (Illinois) reviews Leandra Lederman (Indiana), Valuation as a Challenge for Tax Administration, 96 Notre Dame L. Rev. __ (2021).

Layser (2018)Property valuation lies at the center of many federal, state, and local tax policy debates. At the federal level, property valuation features prominently in problems related to gift and estate taxes, charitable contribution deductions, conservation easements, transfer pricing, and proposed wealth taxation. At the state and local levels, valuation problems arise most frequently in the context of property taxation. The goal of property valuation, of course, is to determine how an asset would be priced in an arms-length sale. In a forthcoming essay, Leandra Lederman argues that to achieve this goal, the tax law must overcome challenges presented by (i) opposing incentives that taxpayers have from the tax agency, and (ii) accurate measurement.

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January 22, 2021 in Scholarship, Tax, Tax Scholarship, Weekly SSRN Roundup, Weekly Tax Roundup | Permalink

Tax Policy In The Biden Administration

Next Week's Virtual Tax Workshops

Monday, January 25:  Jonathan Choi (Minnesota) will present Beyond Purposivism in Tax Law virtually in California as part of the San Diego-Davis-Hastings Tax Law Speaker Series. If you would like to attend, please contact San Diego Law Events.

Wednesday, January 27: Ari Glogower (Ohio State) will present Taxes By Omission virtually at Toronto as part of its James Hausman Tax Law and Policy Workshop Series. If you would like to attend, please contact Angeliki Zacharakis.

Friday, January 29:  David Gamage (Indiana) will present On The Why And How Of Wealth Tax And Accrual Income Tax Reforms virtually at Minnesota today as part of its Perspectives on Taxation Lecture Series. If you would like to attend, please contact Kristin Hickman.

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January 22, 2021 in Colloquia, Legal Ed News, Legal Education, Scholarship, Tax, Tax Scholarship, Tax Workshops | Permalink

Morgan Lewis Seeks To Cut Tax Ties With Trump

Daily Report, Morgan Lewis Seeking to Cut Ties With Trump:

Morgan LewisWhile a growing number of law firms and businesses have cut ties with former President Donald Trump’s businesses in the wake of the Jan. 6 mob attack on the U.S. Capitol, the experience of other firms—most notably Morgan, Lewis & Bockius—suggests that attorney-client relationships cannot be undone with the snap of a finger.

A spokesperson for Morgan Lewis indicated Tuesday that it is working to wrap up its long-running tax work for the former president and his companies. ...

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January 22, 2021 in Legal Ed News, Legal Education, Tax, Tax News | Permalink

Colinvaux: How The Biden Administration Can Fix Problematic Charitable Giving Laws

Chronical of Philanthropy op-ed:  We Need to Fix Problematic Charitable Giving Laws. The Biden Administration Can Help., by Roger Colinvaux (Catholic):

The recent exceptional generosity of philanthropists such as MacKenzie Scott deserves our applause. But we shouldn’t let their worthy actions blind us to the bigger problems facing philanthropy today: namely, that the laws promoting charitable giving no longer effectively serve their key purposes.

Here’s why: These laws offer giving incentives to too few donors, unfairly favoring wealthy taxpayers and degrading civil society in the process; they encourage donors to delay their giving, potentially for generations, and they increasingly fail to prevent fraud and abuse in charitable organizations, undermining trust.

Fortunately, all these problems have solutions ripe for pursuit by the incoming Biden administration. Here is a road map of where we are now — and the changes needed to move our tax policies in a better direction. ...

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January 22, 2021 in Tax, Tax News | Permalink

Thursday, January 21, 2021

Walker Presents Tax Complexity and Technology Virtually Today At Boston University

David Walker (Boston University) presents Tax Complexity and Technology virtually at Boston University today as part of its Faculty Workshop Series:

Walker (2016)The federal income tax code has become increasingly complex over time with the implication that many taxpayers no longer understand the connection between their life decisions and their taxes. Some commentators have suggested that increasing computational complexity may be attributable in part to the proliferation of tax preparation software that renders such complexity manageable at filing time, but otherwise does nothing to mitigate the “black box” nature of the tax system. While such complexity and opacity undercut explicit incentives embedded in the Code, make planning more difficult, and undermine political accountability for taxes, they may also reduce the inefficient distortion or deadweight loss of the income tax, particularly with respect to higher-income taxpayers.

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January 21, 2021 in Colloquia, Scholarship, Tax, Tax Scholarship, Tax Workshops | Permalink

Kaplan: Estate Planning For Retirement Benefits After The SECURE Act

Richard L. Kaplan (Illinois), Estate Planning for Retirement Benefits after the SECURE Act, 46 ACTEC L.J. 79 (2020):

This brief essay examines one of the most significant intersections of Elder Law and Trusts & Estates – namely, distributions from defined contribution retirement plans after the participant dies. Particular attention is paid to recently enacted statutory changes, including the end of so-called “stretch IRAs,” which allowed non-spouse beneficiaries to spread withdrawals from inherited retirement accounts over their lifetimes. This essay also addresses strategic considerations in designating beneficiaries for such accounts.

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January 21, 2021 in Scholarship, Tax, Tax Scholarship | Permalink

Gutman: Taxing Gains At Death

Harry L. Gutman (Ivins, Phillips & Barker, Washington, D.C.), Taxing Gains at Death, 170 Tax Notes Fed. 215 (Jan. 11, 2021):

Tax Notes Federal (2020)Joe Biden has proposed addressing income inequality in part by eliminating the tax-free step-up in basis for property passing at death. Although details are lacking, the proposal would address a glaring omission from a comprehensive income tax base — an omission that exacerbates vertical inequity and produces horizontal inequity, inefficient resource allocation, and significant revenue loss.

In this article, I argue that tax-free step-up should be repealed and replaced by a regime in which death and lifetime transfers are income tax realization events. That would mean that when an individual dies owning property that has appreciated in value, tax would be payable on that gain rather than forgiven as it is under current law. Conforming rules would treat lifetime transfers similarly.

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January 21, 2021 in Scholarship, Tax, Tax Scholarship | Permalink

Taxing Trades: Proposals To Keep Moneyball Out Of Tax Law

Cody Wilson (J.D. 2020, SMU), Comment, Taxing Trades: Proposals to Keep Moneyball Out of Tax Law, 72 SMU L. Rev. 953 (2019):

Moneyball (2019)Ever since professional sports first captivated the hearts and minds of American fans, team scouts have scoured the land for athletic talent. Upon discovery, scouts must gauge the discovered player’s worth to their team, which is done through both observation and statistical analysis commonly known as “Moneyball.” However, as economists note, such valuation methods often fall short. Nonetheless, following the Tax Cuts and Jobs Act of 2017 (TCJA), current tax laws require that Internal Revenue Service (IRS) agents engage in the same player valuation conundrum to assess the tax consequences of trades between teams.

Before the TCJA, § 1031 of the Internal Revenue Code allowed trades of player contracts and future draft picks to go untaxed. Section 1031 allowed this because such trades constituted a like-kind exchange, which prevented any gain or loss from being recognized for tax purposes. Now, the TCJA has limited the non-recognition treatment afforded by § 1031 to real property, forcing IRS agents to ascertain the fair market value of player contracts and future draft picks to assess the tax consequences of trades. Adding to the conundrum facing the IRS, the Treasury Department has created a safe harbor permitting teams to treat player contracts and future draft picks as having a zero value for tax purposes; however, the Treasury Department has not released guidance addressing how valuations are to occur when teams avoid the safe harbor.

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January 21, 2021 in Scholarship, Tax, Tax Scholarship | Permalink

Wednesday, January 20, 2021

Layser Presents Redevelopment Tax Incentives And Gentrification Online Today At Toronto

Michelle Layser (Illinois) presents Redevelopment Tax Incentives and Gentrification: A Spatial Analysis online at Toronto today as part of its James Hausman Tax Law and Policy Workshop Series:

Michelle-Layser (1)Place-based tax incentives, such as the New Markets Tax Credit (NMTC) and Opportunity Zones incentives, are often used to promote investment in low-income census tracts. Critics fear that when gentrifying neighborhoods are eligible for incentives, they will attract investment away from the neighborhoods that need it most. However, few studies have provided empirical analysis to assess whether these concerns have merit. Through a novel geospatial analysis of the location patterns of tax-subsidized projects, this Article provides new evidence of inequitable distributions of tax credits, which can inhibit their ability to benefit struggling communities. These findings have profound implications for the federal and state NMTC programs, as well as the new Opportunity Zones law. This Article analyzes 15 years of NMTC data to explore location patterns of tax subsidized investments in 20 U.S. cities. It employs spatial analysis methods to describe the location patterns of investment and their relationship to two variables known to correlate with gentrification: high vacancy rates and increasing rental rates.

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January 20, 2021 in Colloquia, Scholarship, Tax, Tax Scholarship, Tax Workshops | Permalink

Luke Reviews Field's M&A Termination Rights Triggered By Changes In Law

Jotwell (Tax) (2016)Charlene Luke (Florida), The Upside of Investigating Taxpayers' Approaches to the Downside Risks of Tax Law Change (reviewing Heather M. Field (UC-Hastings), Tax MACs: A Study of M&A Termination Rights Triggered by Material Adverse Changes in Law, 73 Tax Law. 823 (2020)):

Heather M. Field’s Tax MACs: A Study of M&A Termination Rights Triggered by Material Adverse Changes in Law presents information and insights about tax-specific material adverse change provisions in publicly filed mergers and acquisitions (M&A) agreements from May 2014–May 2019. Field identified and primarily focused on 13 agreements with “Tax MAC Out” provisions, meaning that these agreements provided an exit right that could be exercised unilaterally because of adverse tax law changes. Field also located 6 agreements that contained express Tax MAC provisions but that did not provide a unilateral ability to exit; most in this group were in the form of requiring the parties to work to address the tax change through restructuring, with termination expressly not following from an inability to complete such restructuring.

The article highlights the bespoke nature of Tax MAC provisions; while Field found that some boilerplate language recurred, there were also substantial differences among the agreements, and the article suggests explanations for the variability, tied to specific instances of difference. As Field notes, the heterogeneity suggests ample “opportunities for nuanced bargaining and value-added lawyering.” ...

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January 20, 2021 in Scholarship, Tax, Tax Scholarship | Permalink

A Critical Assessment Of The Originalist Case Against Administrative Regulatory Power: New Evidence From The Federal Tax On Private Real Estate In The 1790s

Nicholas R. Parrillo (Yale), A Critical Assessment of the Originalist Case Against Administrative Regulatory Power: New Evidence from the Federal Tax on Private Real Estate in the 1790s, 130 Yale L.J. ___ (2021):

The Supreme Court is poised to toughen the nondelegation doctrine to strike down acts of Congress that give broad discretion to administrators, signaling a potential revolution in the separation of powers. A majority of the Justices have suggested they are open to the sweeping theory that all agency rulemaking is unconstitutional insofar as it coerces private parties and is not about foreign affairs. If adopted, this theory would invalidate most of the federal regulatory state. Jurists and scholars critical of rulemaking’s constitutionality base their claims on the original meaning of the Constitution. But these critics face a serious obstacle: early Congresses enacted several broad delegations of administrative rulemaking authority. The critics’ main response has been that these early statutes don’t count, because they fall into areas in which (say the critics) the original nondelegation doctrine did not apply, or applied only weakly: non-coercive legislation (e.g., giving benefits) or foreign-affairs legislation.

This Article finds that the originalist critics of rulemaking are mistaken to say that no early congressional grant of rulemaking power was coercive and domestic. There is a major counter-example missed by the literature on nondelegation, indeed by all of legal scholarship, and not discussed more than briefly even by historians: the rulemaking power under the “direct tax” of 1798. In that legislation, Congress apportioned a federal tax quota to the people of each state, to be paid predominantly by owners of real estate in proportion to their properties’ respective values. Thousands of federal assessors assigned taxable values to literally every house and farm in every state of the Union, deciding what each was “worth in money”—a standard that the legislation stated but did not define. Because assessors in different parts of a state could differ greatly in how they did valuation, Congress established within each state a federal board of tax commissioners with power to divide the state into districts and to raise or lower the assessors’ valuations of all real estate in any district by any proportion “as shall appear to be just and equitable”—a phrase undefined in the statute and not a term of art. The federal boards’ power to revise valuations en masse in each intra-state tax district is identical to the fact pattern in the leading Supreme Court precedent defining rulemaking. Thus, each federal board in 1798 controlled, by rule, the distribution of the federal tax burden within the state it covered.

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January 20, 2021 in Scholarship, Tax, Tax Scholarship | Permalink

Taxing Cannabis On The Reservation

Mark J. Cowan (Boise State University), Taxing Cannabis on the Reservation, 57 Am. Bus. L.J. ___ (2020):

American Indian tribes that enter the cannabis industry confront a multi-sovereign tax system that lacks certainty and horizontal equity. The complex interaction of state legalization and taxation of cannabis, federal tax law, the status of tribes as both governments and business enterprises, and the legal and tax landscape in Indian country can give tribes tax advantages and disadvantages compared to off-reservation cannabis dispensaries. This article analyzes these tax issues, examines them in the context of prior challenges posed by Indian gaming, and suggests reforms that address the tax inequities that can result from cannabis sales on Indian reservations.

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January 20, 2021 in Scholarship, Tax, Tax Scholarship | Permalink

Tuesday, January 19, 2021

Kirsch: Conditioning Citizenship Benefits On Satisfying Citizenship Obligations

Michael S. Kirsch (Notre Dame), Conditioning Citizenship Benefits on Satisfying Citizenship Obligations, 2019 U. Ill. L. Rev. 1701:

Citizenship status is often discussed in terms of both its benefits and its obligations. A recently enacted Federal statute (the FAST Act), which denies U.S. passports to certain citizens who owe significant unpaid taxes, provides an opportunity to examine the linkage between citizenship benefits and obligations. In particular, it raises the question under what circumstances, if any, should the benefits of citizenship be conditioned on compliance with the obligations of citizenship.

This Article identifies a typology for situating unpaid taxes within other circumstances under which passports may be denied to U.S. citizens. It then focuses on the instrumental, constitutional, and expressive impacts of the FAST Act, illustrating that the benefit-obligation linkage can have unintended consequences, not only from an instrumental perspective, but perhaps more importantly from its expressive impact on social norms. The Article then applies these lessons to a broader range of situations where Federal benefits are conditioned on compliance with citizenship obligations, most notably the denial of student loan benefits for those young men who do not register with the Selective Service.

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January 19, 2021 in Scholarship, Tax, Tax Scholarship | Permalink

National Taxpayer Advocate Delivers 2020 Annual Report To Congress

NTA

IR-2021-11 (Jan. 13, 2021), National Taxpayer Advocate Delivers Annual Report to Congress; Focuses on Taxpayer Impact of COVID-19 and IRS Funding Needs:

National Taxpayer Advocate Erin M. Collins today released her 2020 Annual Report to Congress, focusing on the unprecedented challenges taxpayers faced in filing their tax returns and receiving refunds and stimulus payments during a year consumed by the COVID-19 pandemic. The report also finds that a roughly 20% inflation-adjusted reduction in the IRS's budget since fiscal year (FY) 2010 has left the agency with antiquated technology and inadequate staffing levels to meet taxpayers' needs.

As part of the report, Collins released the fourth edition of the National Taxpayer Advocate's "Purple Book," a compilation of 66 legislative recommendations designed to strengthen taxpayer rights and improve tax administration.

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January 19, 2021 in IRS News, Tax, Tax News | Permalink

Lesson From The Tax Court: The CDP Silver Linings Playbook

Tax Court (2020)Tax practitioners tend not to know much about bankruptcy.  Today’s lesson is for them.  In Wiley Ramey v. Commissioner, 156 T.C. No. 1 (Jan. 14, 2021), Judge Toro held that a CDP notice properly sent to a taxpayer’s last known address triggers the time period for the taxpayer to request a CDP hearing, even if the CDP notice is actually delivered to a different person who shares that address.  That is the tax lesson most folks will see in this case, and it’s a good one.

I see an additional lesson, a bankruptcy lesson.  While the taxpayer’s failure to timely request a CDP hearing meant no he received no Tax Court review of the administrative hearing, the news is not all bad.  The lesson for today is about silver linings:  the taxpayer’s equivalent hearing still got the delay benefits of CDP, and that delay did not count against Mr. Ramey should he file bankruptcy and seek a discharge of the tax liabilities at issue.  Practitioners would not be crazy to put this lesson in a Playbook, a CDP Silver Linings Playbook.  Yeah, it was a good movie, too.  More below the fold.

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January 19, 2021 in Bryan Camp, New Cases, Scholarship, Tax, Tax Practice And Procedure, Tax Scholarship | Permalink

TaxProf Blog Holiday Weekend Roundup

Monday, January 18, 2021

NY Times: Biden May Eliminate Step-Up In Basis At Death, Hurting Jeff Bezos, Elon Musk, And Efforts To Close The Black Wealth Gap

New York Times Wealth Matters:  The Estate Tax May Change Under Biden, Affecting Far More People, by Paul Sullivan:

What happens once Mr. Biden can begin enacting changes to tax policy? ... [P]erhaps the best way to consider what to do in 2021 is to think about what you need to do in the short, medium and long term. There’s a lot to think about, so I’m going to break this topic into two columns. This week, I’m going to look at long-term issues; next week, I’ll get into the more immediate tax issues that could bubble up this year.

The biggest potential long-term change involves the estate tax. But in contrast to previous changes, the tax code could be modified in a way that affects everyone who has something of value to leave to heirs.

For decades, assets were valued at the time of the owner’s death, even if the value had risen. This so-called step-up in basis rule works like this: If a stock that was bought for $1 is worth $10 when the owner dies, the gain is $9. But when that asset is passed on to heirs, the embedded gain is wiped out because the base value is now $10 and no capital gains tax is owed.

This treatment applies to any asset, from liquid securities and private investment partnerships to a family home. If the total value of the estate is less than the current $11.7 million exemption level for an individual or $23.4 million for a couple, then no estate tax would need to be paid, either.

A Biden administration may move to change this for logical and revenue reasons. At one point, the step-up in basis made sense. Imagine trying to determine the capital gains from AT&T stock that your grandmother bought in 1943 when record-keeping was done with a pencil and paper. Today, cost-basis information can be retrieved in seconds.

But two different groups of people have raised concerns about losing the step-up loophole: the very wealthy and the moderately wealthy.

If you’re Jeff Bezos or Elon Musk, the two richest people in the world, having your long-term holdings in Amazon and Tesla given a step-up in basis is a huge savings on capital gains tax, because they’re going to be paying estate tax regardless.

But for people of more modest wealth, say someone lucky enough to inherit a home or a stock portfolio, the loss of step-up could be even more significant. ...

For the Black community, the prospect of an heir’s paying capital gains tax on inherited property could contribute to maintaining the racial wealth gap, said Calvin Williams Jr., chief executive and founder of Freeman Capital.

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January 18, 2021 in Tax, Tax News | Permalink

Sunday, January 17, 2021

The Gospel In A Democracy Under Christian Assault

Russell Moore (President, Ethics & Religious Liberty Commission, Southern Baptist Convention), The Gospel in a Democracy Under Assault:

How can this be our country?

As I watched on television images of angry mobs pouring into the United States Capitol, my hands were trembling with rage. A friend who has served for many years in government texted, “This looks like the fall of Rome to me.”

Indeed, it does—including the reality that, years before anyone scaled the walls of the Eternal City, Rome was captivated with bread and circuses. What can Americans—especially followers of Jesus Christ—do in a time when it seems that our very republic is more fragile than ever before?

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January 17, 2021 in Legal Education, Tax | Permalink

The Top Five New Tax Papers

There is a bit of movement in this week's list of the Top 5 Recent Tax Paper Downloads, with a new paper debuting on the list at #5. The #1 paper is #474 among 15,661 tax papers in all-time downloads:

  1. SSRN Logo (2018) [898 Downloads]  A Simple Regulatory Fix for Citizenship Taxation, by John Richardson, Laura Snyder & Karen Alpert (Queensland)
  2. [498 Downloads]  Tax Treaty Negotiations: Myth and Reality, by Yariv Brauner (Florida)
  3. [296 Downloads]  Is It Time to Eliminate Federal Corporate Income Taxes?, by Edward Lane (Albany) & Randall Wray (UMKC)
  4. [233 Downloads]  What May We Expect of a Theory of International Tax Justice?, by Dirk Broekhuijsen (Leiden) & Henk Vording (Leiden)
  5. [192 Downloads]  5 Lessons on Profit Shifting From U.S. Country-by-Country Data, by Kimberly Clausing (UCLA)

January 17, 2021 in Scholarship, Tax, Tax Scholarship, Top 5 Downloads | Permalink

Saturday, January 16, 2021

This Week's Ten Most Popular TaxProf Blog Posts

Cui: China’s Tax Policy Response To The Global Financial Crisis

Wei Cui (British Columbia), China’s Tax Policy Response to the Global Financial Crisis:

VAT reform constituted the most important tax policy action China took during the global financial crisis in 2008-9. If China had had a more typical tax structure, this specific policy instrument (as well as certain others) would not have been available. Conversely, because of the idiosyncrasies of China’s current tax structure, some of the policy measures commonly deployed in other countries also cannot be used. In comparing China and Europe in the tax policies adopted since 2008, therefore, major differences in prior tax structures must be taken into account. There are also two other potential determinants of China’s tax policy.

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January 16, 2021 in Scholarship, Tax, Tax Scholarship | Permalink

Friday, January 15, 2021

Weekly SSRN Tax Article Review And Roundup: Kim Reviews Holderness' Tax Relief for Commuters

This week, Young Ran (Christine) Kim (Utah) reviews a new work by Hayes Holderness (Richmond), Changing Lanes: Tax Relief for Commuters, 40 Va. Tax Rev. ___ (2021).

KimCommuting has mixed motives: one must travel to get to work (business motive), but the extent and burden of the travel is the result of the personal choice about where to live (personal motive). However, there is no middle ground under the tax law; an expense is classified as either personal or business. Under current law, it is well established that commuting expenses are personal, and thus, nondeductible expenses under the tax law (e.g., Comm'r v. Flowers, 326 U.S. 465 (1946)). However, in the wake of COVID-19, working from home has become the new normal. Many people who used to commute to work no longer have the same amount of expenditure for commuting, such as gas and metro passes. What are the normative implications of such changed behavior? Hayes Holderness offers his views in his recent essay, Changing Lanes: Tax Relief for Commuters (forthcoming in Va. Tax Rev.).

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January 15, 2021 in Christine Kim, Scholarship, Tax, Tax Scholarship, Weekly SSRN Roundup, Weekly Tax Roundup | Permalink

Tax Policy In The Trump Administration

The Tax Lawyer Publishes New Issue

The Tax Lawyer has published Vol. 74, No. 1 (Fall 2020):

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January 15, 2021 in ABA Tax Section, Scholarship, Tax, Tax Scholarship | Permalink

Global Implementation Of Soda Taxes: Is There A Better Solution For Combatting Obesity?

Lauren Cedeno (J.D. 2020, Brooklyn), Global Implementation of Soda Taxes: Is There a Better Solution for Combatting Obesity?, 45 Brook. J. Int'l L. 329 (2019):

As incidences of overweight and obese populations continue to increase around the world, countries are looking for ways to decrease the prevalence of this epidemic. Soda and SSB taxes have increased in prevalence as countries seek to address the health problems associated with consumption of soda and other sugary beverages. This Note explores the implementation of these taxes in Mexico, Europe, and the United States. In analyzing these taxes, this Note seeks to gain a greater understanding of whether these taxes have impacted overweight and obesity rates in the countries and municipalities that have enacted them. This Note argues that soda and SSB taxes are only the first step in addressing this growing health epidemic and that more robust health policies are necessary to achieve a healthier global population.

Conclusion
The international community must begin to acknowledge the dangerous role that SSBs and other sugar-filled products play in the onset of NCDs caused by obesity. NCDs linked to poor consumption habits are currently the leading cause of death in the world today. Taxes on SSBs have been a critical step toward addressing the role sugary products play in the onset of NCDs and obesity. Without new policies to address the threat that obesity poses to population health, however, it is likely that the risk of obesity-related illness will only continue to rise. By imposing stricter regulations on the accessibility of SSBs, the sugar content in those products, and the manners in which they can be advertised, as well as developing more holistic food and beverage health initiatives, countries may very well see a substantial drop in obesity rates. Accordingly, it is important that international health organizations, such as the WHO, continue to raise awareness about the adverse health consequences that flow from diets high in food and drinks lacking proper nutrition. They can do this by encouraging countries to enact and reform legislation to better tackle the obesity epidemic.

January 15, 2021 in Scholarship, Tax, Tax Scholarship | Permalink

Thursday, January 14, 2021

Lederman: Valuation As A Challenge For Tax Administration

Leandra Lederman (Indiana), Valuation as a Challenge for Tax Administration, 96 Notre Dame L. Rev. ___ (2021):

Valuation issues have long posed challenges for the U.S. federal tax system. This is not just because of questions about what technique will most accurately value particular types of property. A key problem for tax administration is that taxpayers have an incentive to claim erroneous, self-serving valuations. This Essay analyzes tax valuation through this tax compliance lens. In so doing, it highlights the importance that third parties to the taxpayer-government relationship act at arm’s-length from the taxpayer. It also explains why penalties are insufficient to deter erroneous self-reported valuations. The Essay also draws on the tax compliance perspective to make some preliminary observations about valuation methodologies.

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January 14, 2021 in Scholarship, Tax, Tax Scholarship | Permalink

Hemel & Polsky: Taxing Buybacks

Daniel J. Hemel (Chicago) & Gregg D. Polsky (Georgia), Taxing Buybacks, 38 Yale J. on Reg. 246 (2021):

Yale J RegA recent rise in the volume of corporate share repurchases has prompted calls for changes to the rules governing stock buybacks. These calls for reform are animated by concerns that buybacks enrich corporate executives at the expense of productive investment. This emerging antibuyback movement includes prominent politicians as well as academics and Republicans as well as Democrats. The primary focus of buyback critics has been on securities-law changes to deter repurchases, with only passing mention of potential tax-law solutions.

This Article critically examines the policy arguments against buybacks and arrives at a mixed verdict. On the one hand, claims that buybacks reduce corporate investment and inappropriately reward executives turn out to be poorly supported. On the other hand, the Article identifies legitimate tax-related concerns about the rising buyback tide. Buybacks exacerbate two of the U.S. tax system’s most severe flaws. The first is the “Mark Zuckerberg problem”: the effective nontaxation of firm founders on what is essentially labor income. The second is what we call the “Panama Papers problem”: the use of U.S. capital markets by investors in offshore tax havens to generate tax-free returns.

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January 14, 2021 in Scholarship, Tax, Tax Scholarship | Permalink

Domicile In Multistate Personal Income Tax Residency Matters

Scott R. Thomas (Bentley University), Domicile in Multistate Personal Income Tax Residency Matters: Enter the Swamp at Your Own Peril, 39 Pace L. Rev. 875 (2019):

This Article argues that states should remove the domicile concept from the definition of a resident and rely solely on an objective test or tests. Part I of this Article defines the terms resident and domicile using examples from the laws of Massachusetts, Minnesota, and New York. Part II discusses the problems created for individuals and state taxing authorities in the application of a subjective standard, the burden and standard of proof applied, and the domicile or residency bias of states. Part III describes how Congress defines a resident of the United States and the rationale behind Congress’s movement away from its previous subjective standard.

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January 14, 2021 in Scholarship, Tax, Tax Scholarship | Permalink

Wednesday, January 13, 2021

Mason Presents The Legality Of Digital Taxes In Europe Online Today At Toronto

Ruth Mason (Virginia) presents The Legality of Digital Taxes in Europe (with Leopoldo Parada (Leeds)) online at Toronto today as part of its James Hausman Tax Law and Policy Workshop Series:

Mason_ruthThis essay argues that EU taxpayers may challenge digital services taxes as violations of EU law. Specifically, because digital services taxes exempt all but the very largest companies, which are disproportionately foreign, such taxes result in nationality discrimination as applied. As part of our analysis of the legality of digital taxes, we consider what role discriminatory intent should play in resolving nationality discrimination cases. We also evaluate potential justifications for digital taxes, and we argue that two recent decisions by the Court of Justice of the European Union suggest that the Court will uphold such taxes against challenges by taxpayers, but we explain how those cases could be distinguished.

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January 13, 2021 in Colloquia, Scholarship, Tax, Tax Scholarship, Tax Workshops | Permalink

Batchelder: Optimal Tax Theory As A Theory Of Distributive Justice

Lily L. Batchelder (NYU), Optimal Tax Theory as a Theory of Distributive Justice:

The literature on taxation and transfers primarily relies on two theories of distributive justice: resource egalitarianism and welfarism, as elaborated through optimal tax theory. In recent years, optimal tax theory has garnered even greater prominence. But non-welfarists argue it fails to address a number of serious philosophical objections.

This article considers the primary critiques of optimal tax theory, especially by resource egalitarians. It argues the gap between these two theories is narrower than most appreciate. Indeed, once one focuses on egalitarian optimal tax theory and reads that literature broadly, the ideal policy design principles implied by each theory largely mimic the other.

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January 13, 2021 in Scholarship, Tax, Tax Scholarship | Permalink

Graetz: A Major Simplification Of The OECD’s Pillar 1 Proposal

Michael J. Graetz (Columbia), A Major Simplification of the OECD’s Pillar 1 Proposal, 170 Tax Notes Fed. 213 (Jan. 11, 2021):

Tax Notes Federal (2020)In this report, Graetz suggests major modifications to the OECD’s pillar 1 blueprint proposal to create a new taxing right for multinational digital income and some product sales that would greatly simplify the proposal. The modifications rely on readily available existing financial information and would achieve certainty in the application of pillar 1, while adhering to its fundamental structure and policies.

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January 13, 2021 in Scholarship, Tax, Tax Analysts, Tax Scholarship | Permalink

The 1920s, The Digital Economy, And The Great Covid Lockdown

Craig Elliffe (Auckland), Assessing the Flaws in the 1920s Compromise in the Times of the Burgeoning Digital Economy and the Great Lockdown:

The COVID-19 pandemic has been described by the International Monetary Fund as the worst recession since the Great Depression. The combination of tax shortfalls, increased government spending, and the irrefutable growth in the digital economy has created a situation which means that the world arrives at the crossroads of international tax reform with a great sense of urgency. If there is political consensus, reform will be in the format proposed, or similar to, the OECD/Inclusive Framework’s proposal (described as the 2020s compromise). In the absence of political consensus, then the world will travel down the other branch of the crossroads and we will see the introduction of a plethora of interim and unilateral domestic taxes.

The existing international tax rules are widely regarded as being “not fit for purpose”. After a brief introduction of the history of the international tax framework (referred to by some as the 1920s compromise), this paper traces the development of the current OECD/Inclusive Framework proposals as international tax policymakers grapple with the vexing problem of how to tax multinationals who do business across borders, particularly those that operate using a highly digitalised business model.

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January 13, 2021 in Scholarship, Tax, Tax Scholarship | Permalink

Tuesday, January 12, 2021

This Economist Has A Radical Plan To Solve Wealth Inequality

Wired, This Economist Has a Radical Plan to Solve Wealth Inequality:

CapitalPiketty’s 753-page book Capital in the Twenty-First Century, published in 2013, sold 2.5 million copies worldwide and helped put inequality on the global agenda. But his latest, the even thicker Capital and Ideology, may prove still more influential. The book is nothing less than a global history of inequality and the stories that societies tell to justify it, from pre-modern India to Donald Trump’s US. It arrives just as anger about inequality (some of it generated by Piketty’s work) approaches boiling point, and was channelled by a contender for the White House, Bernie Sanders.

Capital and Ideology builds on Piketty’s long-standing argument that inequality has soared across the world since 1980. It proposes strong remedies. Piketty wants to slap wealth taxes of 90 per cent on any assets over $1 billion, and waxes nostalgic about the postwar decades when British and American top marginal income-tax rates were over 80 per cent. ...

In an era when technology platforms are arguably concentrating wealth in the hands of a diminishing number of people in the Valley, Piketty’s advocacy of much higher taxes has attracted the attention of both progressives and radicals around the world. ...

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January 12, 2021 in Book Club, Scholarship, Tax, Tax Scholarship | Permalink

Hatfield: Professionally Responsible Artificial Intelligence

Michael Hatfield (University of Washington), Professionally Responsible Artificial Intelligence, 51 Ariz. St. L.J. 1057 (2019):

As artificial intelligence (AI) developers produce more applications for professional use, how will we determine when the use is professionally responsible? One way to answer the question is to determine whether the AI augments the professional’s intelligence or whether it is used as a substitute for it. To augment the professional’s intelligence would be to make it greater, that is, to increase and improve the professional’s expertise. But a professional who substitutes artificial intelligence for his or her own puts both the professional role and the client at risk. The problem is developing guidance that encourages professionals to use AI when it can reliably improve expertise but discourages substitution that undermines expertise. 

This Article proposes a solution, using tax professionals as a case study. There are several reasons tax professionals provide a good case study, including that tax practice has a long history of computerization and that AI is already being developed for tax professionals. Tax professionals, including not only lawyers but certified public accountants, are directly regulated by the Internal Revenue Service (IRS), in addition to their regulation by professional bodies.

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January 12, 2021 in Scholarship, Tax, Tax Scholarship | Permalink

Fifteen Law Schools Are Looking To Hire Tax Profs

Law schools looking to hire tenure-track/tenured Tax Profs to start in the 2021-22 academic year:

January 12, 2021 in Legal Education, Tax, Tax Prof Jobs | Permalink

What May We Expect Of A Theory Of International Tax Justice?

Dirk Broekhuijsen (Leiden) & Henk Vording (Leiden), What May We Expect of a Theory of International Tax Justice?:

In this article, we discuss what may be expected of a theory of international tax justice. After looking at the most important distributive as well as procedural theories of tax justice, we conclude that none of the existing theories can provide a coherent account of international tax justice. We therefore propose an alternative, more pragmatic approach drawing on Amartya Sen.

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January 12, 2021 in Scholarship, Tax, Tax Scholarship | Permalink

Monday, January 11, 2021

Kamin: How Far To Go In Reforming Taxation Of Wealth

David Kamin (NYU), How Far to Go in Reforming Taxation of Wealth: Revenue and Tax Avoidance, 168 Tax Notes Fed. 1225 (Aug. 17, 2020):

Tax Notes Federal (2020)The article describes the revenue estimates of incremental versus fundamental reform options for taxation of individual wealth, and explains how tax avoidance assumptions underlie the larger estimates for fundamental reform. 

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January 11, 2021 in Scholarship, Tax, Tax Analysts, Tax Scholarship | Permalink

The Impact Of Potential Tax Reform On Stock Market Returns: 2016 Election To TCJA

Anthony M. Diercks (Board of Governors, Federal Reserve), Daniel Soques (University of North Carolina-Wilmington) & William Waller (Tulane), The 283 Days of Stock Returns after the 2016 Election:

Conventional wisdom suggests that the promise of tax legislation played an important and positive role in the 25% increase in the stock market that began on November 9, 2016 and continued through December 22, 2017 (the day TCJA was signed into law). Our comprehensive and exhaustive forensic analysis confirms its positive effect. With that said, we find that its net impact is relatively modest.

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January 11, 2021 in Scholarship, Tax, Tax Scholarship | Permalink

2021 Tannenwald Tax Writing Competition

Tannenwald (2013)The Theodore Tannenwald, Jr. Foundation for Excellence in Tax Scholarship and American College of Tax Counsel are sponsoring the 2021 Tannenwald Tax Writing Competition:

Named for the late Tax Court Judge Theodore Tannenwald, Jr., and designed to perpetuate his dedication to legal scholarship of the highest quality, the Tannenwald Writing Competition is open to all full- or part-time law school students, undergraduate or graduate. Papers on any federal or state tax-related topic may be submitted in accordance with the Competition Rules.

Prizes:

  • 1st Place:  $5,000
  • 2nd Place: $2,500
  • 3rd Place:  $1,500

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January 11, 2021 in Legal Education, Tax, Teaching | Permalink

Dayton Seeks To Hire A Tax Prof

University of Dayton School of Law:

Dayton LogoThe University of Dayton School of Law invites applications for a tenure-track Assistant Professor position to begin August 16, 2021. Areas of particular need include contracts, secured transactions, business organizations, property, wills and trusts, and/or tax.

Applicants must have a J.D. or the equivalent degree from a foreign institution.

While not everyone may possess all the preferred qualifications, the ideal candidate will bring many of the following:

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January 11, 2021 in Legal Education, Tax, Tax Prof Jobs | Permalink

Lesson From The Tax Court: Too Much Control Over IRA Distribution Makes It Income

Tax Court (2020)Note: The Tax Court has migrated to a different operational internet platform.  As of last Friday, any opinions (if any) issued by  the Court since it closed its old platform in late November, are not accessible.  Further, older opinions are also not accessible, unless another website (such as leagle.com or casetext.com) captured a copy before the old platform closed.  That is why I am unable to provide a link to this week's case.  If any reader has public link to the opinion I would be grateful.

A fundamental concept I teach my tax students is the idea of control.  Taxpayers who engage in schemes where they ostensibly never touch a payment but in reality control its disposition often cannot escape taxation.  In Brett John Ball v. Commissioner, T.C. Memo. 2020-152 (Nov. 10, 2020) (Judge Halpern), the taxpayer caused his self-directed IRA to distribute money to a wholly owned LLC, then caused the LLC to issue short-term loans to real estate entities.  When the loans were repaid, Mr. Ball re-deposited the money into the IRA.  The taxpayer had some decent arguments on why he should not have to report the IRA distributions as income.  Judge Halpern rejected those arguments, teaching us a lesson about how much control is too much control.

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January 11, 2021 in Bryan Camp, New Cases, Scholarship, Tax, Tax Practice And Procedure, Tax Scholarship | Permalink | Comments (1)

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