Marian: The Taxation Of Block Rewards

Omri Marian (UC-Irvine; Google Scholar), Law, Policy, and the Taxation of Block Rewards, 175 Tax Notes Fed. 1493 (June 6, 2022):

This report addresses the taxation of block rewards — the rewards offered to validators of blockchain transactions in exchange for maintaining the public blockchain ledger. The main question the report seeks to answer is whether newly minted cryptocurrencies (a component of block rewards) are taxable upon receipt. Some commentators have suggested that there is legal ambiguity about whether block rewards are taxable upon receipt because of the novelty of the blockchain technology. There is no such ambiguity. Block rewards are clearly taxable upon receipt under current law.

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Avi-Yonah & Salaimi: A New Framework For Taxing Cryptocurrencies

Reuven Avi-Yonah (Michigan; Google Scholar) & Mohanad Salaimi (S.J.D. 2022, Michigan), A New Framework for Taxing Cryptocurrencies, 175 Tax Notes Fed. 1391 (May 30, 2022):

In this article, Avi-Yonah and Salaimi propose a new framework for taxing cryptocurrency throughout its life cycle. This article summarizes Avi-Yonah and Salaimi, A New Framework for Taxing Cryptocurrencies (Mar. 31, 2022).

This article describes a proposal to tax cryptocurrencies based on their unique features.1 It argues that while various ways of earning or receiving crypto tokens (for example, mining in proof-of-work (PoW) protocols like bitcoin and staking in proof-of-stake (PoS) protocols like ether) generate taxable income, the tax results should take into account positive and negative externalities. It also claims that because of its volatility, crypto should not be taxed until tokens are exchanged for real-world items like fiat currency or goods and services. Finally, this article argues that when crypto tokens are exchanged for fiat currencies or goods and services, they should be treated as foreign currency if held for less than one year. ...

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Blue J's AI Prediction Of Result Of Tax Court Appeal Faces First Test In Federal Circuit Court

Benjamin Alarie (Osler Chair in Business Law, University of Toronto; CEO, Blue J Legal) & Christopher Yan (Senior Legal Research Associate, Blue J Legal), Disguised Distributions and Management Fees: Aspro Revisited, 175 Tax Notes Fed. 1401 (May 30, 2022):

In this article, Alarie and Yan analyze the Eighth Circuit’s recent decision in Aspro concerning the deductibility of management fees the business paid to its shareholders.

In our Blue J Predicts column we use advances in machine learning to analyze pending or recently decided federal income tax cases. This month we follow up on the appeal of a Tax Court decision that we first examined in October 2021. In Aspro, the taxpayer challenged the IRS’s determination that the “management fees” it paid were not deductible because they were disguised corporate distributions of profits. Our initial analysis focused on the pending appeal and on April 26 the Eighth Circuit released its opinion, upholding the Tax Court’s decision. This is the first time a case we have examined in Blue J Predicts has been decided by an appellate court since we began the column in mid-2021.

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ABA Tax Section|Tax Analysts Public Service Tax Fellowship

ABA Tax Section, Tax Analysts Public Service Fellowship:

In response to a need for tax legal assistance for low-income taxpayers, to foster a greater interest in tax-related public service, and to provide seasoned attorneys the opportunity to move into the public interest sector, the ABA Tax Section is pleased to announce a partnership with Tax Analysts to launch the Tax Analysts Public Service Fellowship.

This two-year fellowship offers practicing tax attorneys the opportunity to work in public interest tax law with a nonprofit organization or government entity. For the initial year, the fellow will be based at La Posada Tax Clinic in Twin Falls, Idaho. This powerful nonprofit provides extensive free tax services throughout the state of Idaho.

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Colella: Crispino Upholds IRS Mailbox Rule Reg

Frank G. Colella (Pace), ‘But I Mailed It’ — Crispino Upholds IRS Mailbox Rule Regulation, 173 Tax Notes Fed. 1479 (Dec. 13, 2021):

In Crispino, the U.S. District Court for the District of New Jersey held that taxpayers cannot introduce extrinsic evidence under the common law mailbox rule to establish timely filing of their claim for refund and, accordingly, dismissed the refund action for lack of jurisdiction. Crispino, a decision appealable to the Third Circuit, upheld the IRS’s position that the only means to satisfy section 7502, the statutory “mailbox rule,” is by proper compliance with reg. section 301.7502- 1(e)(2), which requires proof of certified or registered mailing when the IRS alleges that it has not received a document.

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Louis Brandeis, Antitrust, And A Functioning Tax System

Jasper L. Cummings, Jr. (Alston & Bird, Raleigh, NC), Louis Brandeis, Antitrust, and a Functioning Tax System, 175 Tax Notes Fed. 241 (Apr. 11, 2022):

In this article, Cummings wonders what happened to Justice Louis Brandeis’s approach to deciding federal tax cases and whether it has anything to do with antitrust policy. ...

Justice Louis D. Brandeis was one of that small group of justices who wore the “tax wreath” during his tenure on the Supreme Court from 1916 to 1939. The chief justices assigned him the routine opinions in tax cases, which usually involved complex business arrangements or difficult but small-bore interpretational issues, or both. His fellow justices honored him by almost never dissenting or even concurring, and the few times they did, never writing a rebuttal to his reasoning.

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Sanchirico: Should A Global Minimum Tax Be Country-By-Country?

Chris William Sanchirico (Penn; Google Scholar), Should a Global Minimum Tax Be Country-by-Country?, 175 Tax Notes Fed. 549 (Apr. 25, 2022):

In this report, Sanchirico questions the consensus view that a country-by-country approach to global minimum tax design is superior to one based on across-country averaging.

Conclusion
This report shows in the context of a simple game theoretic model that a global minimum tax regime that operates on a country-by-country basis is not necessarily superior to one that is based on global averaging — at least not from the perspective of the high-tax jurisdictions spearheading reform.

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Blue J Predicts With 86% Confidence Debt-Equity Decision In Tribune Media

Benjamin Alarie (Osler Chair in Business Law, University of Toronto; CEO, Blue J Legal) & Kathrin Gardhouse (Senior Legal Research Associate, Blue J Legal), The Debt-Equity Distinction and Tribune Media, 175 Tax Notes Fed. 593 (Apr. 25, 2022):

In this article, Alarie and Gardhouse use the Blue J debt-equity predictor to analyze part of the Tax Court’s recent decision in Tribune Media [v. Commissioner, T.C. Memo. 2021-122 (Oct. 26, 2021)]. ...

Common law debt-equity characterization depends on the synthesis of more than a dozen factual and circumstantial elements. In real-world situations, with so many considerations in play, ambiguity is endemic. The threshold challenge for taxpayers, the IRS, and, ultimately, the courts is to determine the most appropriate characterization for a given financing, all things considered.

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Rosenbloom: The Branch Rule Of Subpart F

H. David Rosenbloom (Caplin & Drysdale; NYU), The Branch Rule: An Unhurried Read of the Statute, 175 Tax Notes Fed. 87 (Apr. 4, 2022):

In this article, Rosenbloom considers the language of the branch rule of subpart F and whether it should apply to both sales and manufacturing branches.

No one is likely to nominate the IRS for a writing award, but some of the Internal Revenue Code’s provisions are especially perplexing. One such provision is the branch rule of subpart F, found in section 954(d)(2):

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Blue J Predicts With 65%-94% Confidence Federal Circuit's Step Transaction Decision In GSS Holdings

Benjamin Alarie (Osler Chair in Business Law, University of Toronto; CEO, Blue J Legal) & Stefanie Di Giandomenico (Senior Legal Research Associate, Blue J Legal), Timing Is Everything: The Step Transaction Doctrine in GSS Holdings, 174 Tax Notes Fed. 1849 (Mar. 28, 2021):

In this article, In this article, Alarie and Di Giandomenico examine the recent decision in GSS Holdings [v. United States, No. 19-728T (Fed. Cl. July 26, 2021),] and use machine learning to evaluate the effect of the selected analytical time frame on the outcome of this step transaction doctrine case. ...

In this article, we explore how tax experts can use machine learning tools to safely test and assess potential litigation strategies before deploying them at trial or on appeal. This can be especially useful for cases involving questions of law that turn on interrelated factors, such as the step transaction doctrine. By way of illustration, we put the recent GSS Holdings Court of Federal Claims decision under our machine learning microscope to see what we can see.

The case is being appealed by the taxpayer, GSS Holdings, to the Federal Circuit. The trial court reached its decision on cross-motions for summary judgment, favoring the government. It applied the step transaction doctrine to step together two transactions, finding them to constitute one asset sale for tax purposes. The court concentrated its analysis on a two-day period leading up to and including the sale, rejecting the taxpayer’s argument that the analysis should begin many years earlier, when the relevant agreements were first negotiated. When following the trial court’s characterization of the relevant time period, Blue J predicts a government win with 65 percent confidence.

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Judge Ketanji Brown Jackson And Tax Cases

Lee A. Sheppard, The Judicial Experience of Circuit Judge Ketanji Brown Jackson, 174 Tax Notes Fed. 1467 (Mar. 14, 2022):

[E]mployers know that elite law schools train their graduates to be appellate judges. They don’t train them to be trial lawyers, trial judges, business planners, wealth advisers, or any of the myriad other practical jobs that lawyers do. Jackson, who has been an appellate judge only since June 2021, has done several of these regular lawyer jobs. She was an appellate public defender in the federal court for three years and sat on the D.C. federal district court for seven years. She was also an assistant special counsel to the United States Sentencing Commission.

Is Jackson’s extensive practical experience relevant? Although the Supreme Court is not a fact-finder, trial experience could be valuable. Bad factual records do make bad law. Some important cases have come to the Court with poorly developed factual records, like the Vietnam-era black armbands in high school case (Tinker v. Des Moines Independent Community School District, 393 U.S. 503 (1969)). Readers will recall that the Court was factually clueless in more than one important tax case (Arkansas Best v. Commissioner, 485 U.S. 212, 222 (1988), and Frank Lyon Co. v. United States, 435 U.S. 561 (1978)). If a Justice Jackson sat up and said, “Really, counsel, is that plausible?” during oral argument, that would not be a bad thing. ...

This article analyzes Jackson’s judicial record. Once again, as with the last four Supreme Court nominees, the real issue is administrative law. Can the government expand through administrative rulemaking? Or is enhancement of substantive rules the exclusive province of the legislature? That is highly pertinent to our readers, for whom administrative rulemaking is as or more important than statutory law. Many of the subjects Jackson considered as a federal district judge are controversial, like illegal immigration, but the legal issues are the same administrative procedure issues that our readers face when challenging tax regulations. ...

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Avi-Yonah: The U.S. Should Terminate Its Tax Treaty With Russia

Reuven Avi-Yonah (Michigan; Google Scholar), The United States Should Terminate Its Tax Treaty With Russia, 174 Tax Notes Fed. 1561 (Mar. 14, 2022):

I read with interest Marty Sullivan’s recent article arguing against terminating the U.S. tax treaty with Russia, and I respectfully disagree. (Martin A. Sullivan, “Should the United States Terminate Its Tax Treaty With Russia?” Tax Notes Federal, Mar. 7, 2022, p. 1327.) ...

Sullivan is skeptical of using tax for nontax purposes. I would argue that the corporate tax has always been used primarily as a regulatory device, and there is no difference between using it for foreign policy goals than using it for other non-revenue-raising goals like discouraging pollution or encouraging green investments.

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Wang: Where People Spend Their Child Tax Credit

Binnan Wang (Case Western), Where People Spend Their Child Tax Credit, 173 Tax Notes Fed. 1061 (Nov. 22, 2021):

In this report, Wang examines the different ways the automatic child tax credit is being used by various categories of taxpayers, and she explains why the payments have become a penalty for some middle-income
taxpayers.

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Blue J Predicts With 86%-95% Confidence That 10th Circuit Will Find That Taxpayer In Olsen Was Not Engaged In A Trade Or Business

Benjamin Alarie (Osler Chair in Business Law, University of Toronto; CEO, Blue J Legal) & Christopher Yan (Senior Legal Research Associate, Blue J Legal), Using Machine Learning to Evaluate the Existence of a Trade or Business: Olsen, 174 Tax Notes Fed. 1231 (Feb. 28, 2021):

In this article, Alarie and Yan examine how machine learning can be used to assess the strength of the taxpayer’s position in the appeal of the Tax Court’s decision in Olsen [v. Commissioner, T.C. Memo. 2021-41 (Apr. 6, 2021)]. ...

When the Tax Court’s opinion was released, Blue J’s algorithm originally predicted with over 95 percent confidence that a court would rule that the taxpayer did not engage in a trade or business after considering all the factors. Blue J made this prediction based on the Tax Court’s finding that the taxpayer did not experience any profitable years since inception.

However, even if we adopt the most favorable version of the taxpayer’s appeal position to include tax benefits as part of profits and we assume that each of the tax years was profitable, Blue J’s algorithm predicts with 86 percent confidence that a court would still likely rule that the taxpayer did not engage in a trade or business.

Table 1 illustrates the effect of profitability on Blue J’s prediction on whether a court is likely to find that the activity constitutes a trade or business.

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A Financial Analysis Of Disguised Sales Of Partnership Interests

Bradley T. Borden (Brooklyn; Google Scholar), Douglas L. Longhofer (Central Missouri), Martin E. Connor Jr. (Debevoise & Plimpton) &  Nastassia Shcherbatsevich (Cravath, Swaine & Moore), A Financial Analysis of Disguised Sales of Partnership Interests, 172 Tax Notes Fed. 381 (July 19, 2021):

This article examines the issues that arise in identifying disguised sales of partnership interests, and it explores whether a financial analysis can help in distinguishing disguised sales from recapitalizations. The article examines law that considers both property and financial transactions that raise disguised-sale considerations. It shows that when property is part of a transaction existing case law and rulings provide helpful guidance for determining whether the transaction might be recast as a disguised sale of a partnership interest. The article also shows that, by contrast, existing authority proves mostly unhelpful in determining whether finance transactions are disguised sales of a partnership interest. The article presents a financial analysis that illustrates the difficulty of identifying disguised sales but also shows how a sale of an interest differs from a recapitalization. The analysis provides a general framework for considering the question of disguised sales of partnership interests, but it does not appear to provide a definitive model for analyzing all financing transactions that might be recast as disguised sales of interests in partnerships.

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Simkovic: Did New Deal Liberalism Steer Too Far To The Right?

Michael Simkovic (USC; Google Scholar), Did New Deal Liberalism Steer Too Far to the Right?, 174 Tax Notes Fed. 681 (Jan. 31, 2022) (reviewing A Half-Century With the Internal Revenue Code: The Memoirs of Stanley S. Surrey (Ajay K. Mehrotra (Northwestern; Google Scholar) & Lawrence Zelenak (Duke), eds. 2022):

Ajay K. Mehrotra, professor of law at the Northwestern Pritzker School of Law, and Lawrence Zelenak, the Pamela B. Gann Professor of Law at Duke Law School, have prepared a sparkling introduction to the recently discovered memoirs of Stanley S. Surrey, which they have also edited for publication.

Surrey was a tour de force in the legal academy and government. His career spanned the rise, peak, and fall of New Deal liberalism and the triumph of Reagan-Thatcherism that followed. Mehrotra and Zelenak deftly portray Surrey’s life against the backdrop of broader social forces and trends. Their sympathy for their subject shines through the essay, but it never veers into hagiography.

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Blue J: Using Machine Learning To Crack The Tax Code

Benjamin Alarie (Osler Chair in Business Law, University of Toronto; CEO, Blue J Legal) & Xue Griffin (Senior Legal Research Associate, Blue J Legal), Using Machine Learning to Crack the Tax Code, 174 Tax Notes Fed. 661 (Jan. 31, 2022):

In this article, Alarie and Griffin review Blue J’s machine-learning predictions from the past year and reflect on the state of the technology of tax prediction.

Conclusion
Even though the strong forms of AI that approach human-level intelligence — AGI — are likely to be decades away, tax practitioners are increasingly able to leverage ML models that provide valuable insight into hidden patterns that will allow them to “crack the code.”

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Zelinsky: Simplifying Income Tax Reporting For Americans Abroad

Edward A. Zelinsky (Cardozo), Simplifying Income Tax Reporting for Americans Abroad, 174 Tax Notes Fed. 513 (Jan. 24, 2022):

In this article, Zelinsky examines the Tax Simplification for Americans Abroad Act (H.R. 6057) and argues that the tax compliance burden for U.S. citizens living abroad can and should be reduced.

Conclusion
Simplifying the tax reporting obligations of U.S. expatriates will not reconcile many opponents of citizenship-based taxation to that policy. Simpler reporting forms will not placate those who believe, on tax policy grounds, that it is wrong for the United States to tax any income earned abroad by expatriated citizens. Nor will that compliance simplification appease U.S. citizens whose foreign earned income exceeds the limits of the section 911 exclusion or who receive significant income that is subject to U.S. taxation because they pay little or no foreign taxes on this income. For these opponents of the United States’ worldwide taxation of all citizens’ incomes, the issue is not compliance costs but the net contribution they are required to make to the federal fisc.

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Burke: Transfers Of Zero-Basis Intangibles To A Partnership

Karen C. Burke (Florida), Transfers of Zero-Basis Intangibles to a Partnership, 174 Tax Notes Fed. 25 (Jan. 3, 2022):

In this report, Burke examines the problem of contributed zero-basis intangibles in light of the IRS’s inadvertent disclosure of a transaction structured by Bristol-Myers Squibb to shift billions of dollars of built-in gain to a related foreign partner.

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Hellerstein & Appleby: Does The Supreme Court’s Decision In Wayfair Apply Retroactively?

Walter Hellerstein (Georgia) & Andrew D. Appleby (Stetson; Google Scholar), Does the Supreme Court’s Decision in Wayfair Apply Retroactively?, 102 Tax Notes St.  715 (2021):

A recent decision of the Oregon Tax Court suggests that it may be premature to dismiss the challenging questions raised by the retroactive application of Wayfair as entirely hypothetical. Accordingly, after providing an overview of the case law governing retroactive application of Supreme Court state tax decisions repudiating preexisting constitutional doctrine, we examine the Oregon Tax Court’s opinion in Global Hookah Distributors Inc. v. Department of Revenue, which addressed the question whether Wayfair applied retroactively to the state’s tobacco products tax.

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Blue J Predicts: Worker Classification In The Gig Economy

Benjamin Alarie (Osler Chair in Business Law, University of Toronto; CEO, Blue J Legal) & Kathrin Gardhouse (Legal Research Associate, Blue J Legal), Predicting Worker Classification in the Gig Economy, 173 Tax Notes Fed. 1733 (Dec. 20, 2021):

In this article, Alarie and Gardhouse examine the classification of workers in the gig economy and use machine-learning models to evaluate the legal factors that determine their categorization as employees or independent contractors for federal income tax purposes.

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The Whiteness Of Tax And How To Narrow The Race Gap

Amanda Athanasiou (Tax Notes), The Whiteness of Tax and How to Narrow the Race Gap:

Tax is probably not at the top of anyone’s list of the most diverse legal professions, nor should it be.

The 2020 U.S. census revealed a more racially diverse population than was measured a decade earlier, with Black or African American individuals accounting for 12.4 percent — 14.2 percent if you include those identifying as Black or African American in combination with another racial group. But just 1.4 percent of American Bar Association Section of Taxation members identified themselves as Black or African American, according to the ABA’s "2021 Goal III Report." That’s the lowest percentage of any of the ABA’s 22 sections.

“The contrast with other areas of the law — which have become more diverse, more progressive in different ways — is just stark,” Steven Dean of Brooklyn Law School told Tax Notes. ...

The race gap in tax matters — not just for the sake of the diversity of the tax bar or the quality of legal and public services but also because the law depends on it. "Who it is that is helping to craft the law is important, and I think tax lawyers of color are underrepresented in those areas,” Alice Abreu of Temple University’s Beasley School of Law told Tax Notes. Abreu and Richard Greenstein, also a Beasley law professor, queried in their 2018 Denver Law Review article “Rebranding Tax/Increasing Diversity” whether the Tax Cuts and Jobs Act might have favored a more diverse population if the tax bar weren't so white.

“There are more people who would make excellent tax lawyers than do it,” Dean said, singling out former Georgia House Minority Leader Stacey Abrams, a classmate of his at Yale Law School who started as a tax lawyer at Sutherland, Asbill & Brennan. ...

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Viard: Rethinking The State And Local Business Tax Deduction

Alan D. Viard (American Enterprise Institute), Rethinking the State and Local Business Tax Deduction, 173 Tax Notes Fed. 1261 (Nov. 29, 2021):

In this article, Viard examines the federal tax deduction for state and local business taxes, and he analyzes reform options that can narrow or eliminate the preferential treatment for some business taxes.

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Warren: The Oxford Proposal For A Corporate Cash Flow Tax

Alvin C. Warren Jr. (Harvard), Evaluating the Oxford Proposal for a Corporate Cash Flow Tax, 173 Tax Notes Fed. 1223 (Nov. 29, 2021):

In this article, Warren examines the argument of the Oxford International Tax Group that its proposal for a cash flow tax on domestic sales by domestic and foreign corporations is progressive because it is equivalent to a cash flow tax on domestic shareholders of domestic and foreign corporations, wherever their sales occur.

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Blue J: Taxpayers Face Uphill Battle In Assignment Of Income Cases

Benjamin Alarie (Osler Chair in Business Law, University of Toronto; CEO, Blue J Legal) & Kathrin Gardhouse (Legal Research Associate, Blue J Legal), Battling Uphill Against the Assignment of Income Doctrine: Ryder, 173 Tax Notes Fed. 1253 (Nov. 29, 2021):

In this article, Alarie and Gardhouse examine the Tax Court’s recent decision in Ryder [T.C. Memo. 2021-88 (July 14, 2021)] and use machine-learning models to evaluate the strength of the legal factors that determine the outcome of assignment of income cases. ...

Conclusion
We have seen that R&A’s chances to shift the liability for the tax payable on the staffing and the ASIG product income was virtually nonexistent. The difficulty of this case from the perspective of the IRS certainly lay in gathering the evidence, tracing the money through the winding paths of Ryder’s paper labyrinth, and making it comprehensible for the court. Once this had been accomplished, the IRS had a more-or-less slam-dunk case regarding the applicability of the assignment of income doctrine. As mentioned at the outset, an assignment of income case will always be an uphill battle for the taxpayer because income is generally taxable to whoever earns it.

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Johnson: The Wonderful Mark-to-Market Tax

Calvin H. Johnson (Texas), The Wonderful Mark-to-Market Tax, 173 Tax Notes Fed. 1227 (Nov. 29, 2021):

Whatever its role in the current U.S. budget decisions, the proposal for mark-to-market taxation is a wonderful idea, so good to be inevitable — at some point. Mark-to-market taxation would tax shareholders on the annual gain from publicly traded stock even when those gains have not been reduced to cash. ...

Both accounting and economics define income to include mark-to-market gains. The 16th Amendment specifically authorizes a tax on income. That alone is sufficient.

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Nuts And Bolts Of the 2021 Advanced, Enhanced Child Tax Credit

Francine J. Lipman (UNLV; Google Scholar) & James E. Williamson (San Diego State), Nuts and Bolts of the 2021 Advanced, Enhanced Child Tax Credit, 173 Tax Notes 319 (Oct. 18, 2021):

The enhancements in the child tax credit (CTC) in the American Rescue Plan Act of 2021 (ARPA) signed by President Biden on March 11 are a targeted child-centered, economic stimulus. Economists estimate that the 2021 CTC enhancements will increase consumer spending by $27 billion to $37 billion, generate $1.9 billion in state and local sales taxes, and create 511,000 new jobs at the median wage. Similar to the economic stimulus in rural areas from Social Security benefits, the enhanced CTC doubles its pre-ARPA spending power of $14 billion for households in rural America.

Less than four months after enactment starting on July 15, Treasury, through the IRS, is delivering almost 40 million monthly installments of estimated advanced, enhanced child tax credits (AECTC) to households, including 60 million children and their families. The Urban-Brookings Tax Policy Center estimates that 92 percent of families with children will receive an average annual CTC of $4,380 in 2021. The Joint Committee on Taxation has estimated that ARPA CTC enhancements cost $110 billion, while Columbia University based Center on Poverty and Social Policy determined that the benefits should be about eight times the cost at $800 billion. CTC benefits include increases to children’s future earnings, retirement benefits, and tax payments, and decreases in child protection and criminal justice services as well as healthcare costs for children and their families because of better health and longevity.

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Avi-Yonah: A Different Way to Tax Stock Buybacks

Reuven Avi-Yonah (Michigan), A Different Way to Tax Stock Buybacks, 173 Tax Notes Fed. 1107 (Nov. 22, 2021):

In this article, Avi-Yonah reviews the Build Back Better Act, which would impose a 1 percent excise tax on corporate stock buybacks. He argues that while the measure is an effective way to raise revenue from high-income taxpayers, it will not address the main tax problem with buybacks: the tax exemption for foreign shareholders, which Congress should reconsider.

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Rosenbloom & Shaheen: Toulouse — No Treaty-Based Credit?

H. David Rosenbloom (Caplin & Drysdale; NYU) & Fadi Shaheen (Rutgers; Google Scholar), Toulouse: No Treaty-Based Credit?, 104 Tax Notes Int'l 417 (Oct. 25, 2021):

This article maintains that the U.S. Tax Court’s decision in Toulouse [v. Commissioner, 157 T.C. No. 4 (2021)]— that U.S. tax treaties with France and Italy do not provide a treaty-based foreign tax credit against the net investment income tax — is mistaken.

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Call For Student Tax Papers: 2022 Chris Bergin Award For Excellence In Writing

Christopher E. Bergin Award for Excellence in Writing:

The 2022 submission period for the Christopher E. Bergin Award for Excellence in Writing is now open! This annual award recognizes superior student writing on unsettled questions in tax law or policy. Learn more about the competition guidelines:

• Eligibility: Applicants must be enrolled in an accredited undergraduate or graduate program during the academic year. Each student may submit only one paper.
• Format: Entries should be a minimum of 2,500 words and a maximum of 12,000 words, including footnotes. Citations should be formatted as footnotes in accordance with the current version of The Bluebook: A Uniform System of Citation. Bibliographies and reference lists are prohibited. Articles should be submitted as Microsoft Word documents.

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Zelinsky: Expand The Taxation Of Educational And Other Charitable Endowments

Edward A. Zelinsky (Cardozo), Expand the Taxation of Educational and Other Charitable Endowments, 173 Tax Notes Fed. 799 (Nov. 8, 2021):

In this article, Zelinsky argues that section 4968, which imposes an annual tax on the investment income of some college and university endowments, should remain in the tax code as a revenue measure and a harbinger of a world in which all charitable endowments pay annual tax on their investment incomes.

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Avi-Yonah: The Case For Reviving The Corporate AMT

Reuven Avi-Yonah (Michigan), The Case for Reviving the Corporate AMT, 173 Tax Notes Fed. 795 (Nov. 8, 2021):

In this article, Avi-Yonah examines the bill introduced by Senate Finance Committee member Elizabeth Warren, D-Mass., to revive the corporate alternative minimum tax as a 15 percent tax on corporate book income, and he argues that it is a sensible way to address some problems of the corporate tax system.

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Shaviro: Bittker’s Pendulum And The Taxation of Multinationals

Daniel N. Shaviro (NYU), Bittker’s Pendulum and the Taxation of Multinationals, 173 Tax Notes Fed. 621 (Nov. 1, 2021):

In this report, Shaviro examines the recent calls for increased entity-level corporate income taxation of multinationals, on both a source and a residence basis, and he details historical parallels.

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Zelinsky: The Case For Limiting The Estate And Gift Tax Charitable Deductions

Edward A. Zelinsky (Cardozo), The Case for Limiting the Estate and Gift Tax Charitable Deductions, 173 Tax Notes Fed. 667 (Nov. 1, 2021):

In this article, Zelinsky argues that all large estates should support the federal treasury and that Congress should limit the estate and gift tax charitable deductions to ensure that they pay some tax.

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Johnson: The Shelf Project — 82 Fair And Efficient Suggestions To Raise $3.5 Trillion

Calvin H. Johnson (Texas), The Shelf Project: 82 Fair and Efficient Suggestions to Raise $3.5 Trillion, 173 Tax Notes Fed. 63 (Oct. 4, 2021):

In this article, Johnson examines Shelf Project proposals that could raise $3.5 trillion in revenue over 10 years without increasing tax rates or the tax burden on lowor middle-income taxpayers while also improving the efficiency of the tax system. ...

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Hasen: Three Cheers For Proposed Changes To Partnership Debt Basis Allocation Rules

David Hasen (Florida), Three Cheers for Proposed Changes to Partnership Debt Basis Allocation Rules, 173 Tax Notes Fed. 489 (Oct. 25, 2021):

In this article, Hasen explains problems with the rules regarding the allocation of basis credit among partners for the partnership’s third-party debt, and why the proposed change from Senate Finance Committee Chair Ron Wyden, D-Ore., would go a long way toward solving them.

Conclusion
Enactment of proposed section 752(e)(1) would represent a substantial improvement over existing law. The PPR aligns basis credit with economic reality; it eliminates tax-motivated manipulations of essentially meaningless risk-of-catastrophic loss allocations; and it eliminates the tax disparity between economically similar recourse and nonrecourse debt arrangements. These reasons alone would suffice to recommend the provision.

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Blue J Predicts With 74% Confidence That 8th Circuit Will Find Customary/Usual Management Fees Are Deductible Under § 162

Benjamin Alarie & Christopher Yan (Blue J Legal), Would Management Fees by Any Other Name Still Be Deductible?, 173 Tax Notes Fed. 499 (Oct. 25, 2021):

In this article, Alarie and Yan examine Aspro [T.C. Memo. 2021-8 (Jan. 21, 2021)] and use machine-learning models to evaluate the strength of the appellant’s arguments in its appeal to the Eighth Circuit concerning the deductibility of management fees the business paid to its shareholders. ...

Conclusion
Blue J predicts with 74 percent confidence that the expenses in connection with the set of services provided to Aspro that are customary or usual will be found to be ordinary and necessary expenses. Blue J also predicts with 56 percent confidence that expenses in connection with the set of services that Aspro has failed to establish are customary or usual will be found not to be ordinary and necessary expenses.

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Beller: S Corporations As Shareholders, LLC Members, And Partners

Herbert N. Beller (Professor of Practice, Northwestern; Of Counsel, Eversheds-Sutherland), S Corporations as Shareholders, LLC Members, and Partners, Part 1, 172 Tax Notes Fed. 1713 (Sept. 13, 2021); S Corporations as Shareholders, LLC Members, and Partners, Part 2, 172 Tax Notes Fed. 1915 (Sept. 20, 2021):

This two-part article focuses on numerous transactional scenarios involving S corporations that have sole or partial ownership interests in other entities, including C corporations, qualified S corporation subsidiaries, single- and multiple-member limited liability companiess and partnerships. Part 1 outlines the fundamentals of how subchapter S operates and examines the tax treatment of transactions through which the S corporation comes into existence, other entities become affiliated with the S corporation group, and cash or other property is transferred from an affiliate to the S corporation or to another affiliate. Part 2 examines the tax consequences of transactions in which a complete or partial interest in an affiliate is sold or otherwise disposed of by the S corporation, including through a taxable stock or assets acquisition, a tax-free reorganization under section 368 or a tax-free corporate separation under section 355.

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Accounting Firms Are Beating Law Firms In The Tax Services Battle

Danielle Higgins Green (Fordham), & Stanley Veliotis (Fordham; Google Scholar), Law vs. Accounting Firms: Competing Over Three Decades of Change, 173 Tax Notes Fed. 13 (Oct. 4, 2021):

In this report, Green and Veliotis investigate how major regulatory and legislative changes over the past three decades have affected the competitive market for tax services between large U.S. law firms and accounting firms — particularly the supply side of the market for tax services provided to corporations.

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Blue J Predicted With 95% Confidence That 7th Circuit Would Affirm Tax Court In Innocent Spouse Cases

Benjamin Alarie & Stefanie Di Giandomenico (Blue J Legal), Blue J Predicted With 95% Confidence That Seventh Circuit Would Affirm Tax Court In Innocent Spouse Cases, 172 Tax Notes Fed. 2149 (Sept. 27, 2021):

Clients often ask tax practitioners what their prospects of success are in litigation. Although the practitioner may have an opinion on the issue, the chances of success are often difficult if not impossible to quantify accurately and reliably. The question becomes even more complicated at the appellate stage because standards of review come into play, and the evidence to draw on is generally limited to what has already been considered by the lower court. New technology is bringing about change. Practitioners can now leverage machine learning systems trained on data from all other relevant decisions to assess the strength of their appeals on the merits. Consequently, tax practitioners and clients can together make data-driven decisions about whether to appeal and, if they do so, to formulate an optimal strategy.

In this article, we examine Rogers [v. Commissioner, No. 20-2789 (7th Cir. Aug. 17, 2021)], a case about innocent spouse relief that was recently decided by the Seventh Circuit. We use this case to illustrate how Blue J’s machine learning technology could have been used by the appellant’s counsel to assess the likelihood of success on appeal and the key factors required to succeed.

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2021 Christopher Bergin Award For Excellence In Tax Writing

Bailey Hans (J.D. 2021, Notre Dame; LL.M. (Tax) 2022, NYU), GoFundMe: The Gift That Keeps on Giving, All Tax Season Long, 172 Tax Notes Fed. 2173 (Sept. 27, 2021):

In this article, Hans examines the tax consequences of donations made through crowdfunding platforms, focusing on the Duberstein standard and tax policy principles, and she explores ways to provide certainty to donors and donees in the absence of administrative or congressional tax guidance.

This article was entered into Tax Analysts’ annual student writing contest and received the 2021 Christopher E. Bergin Award for Excellence in Writing.

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Zelenak: The Deductibility Of Capital Losses In A Mark-to-Market Regime

Lawrence Zelenak (Duke), The Deductibility of Capital Losses in a Mark-to-Market Regime, 172 Tax Notes Fed. 1965 (Sept. 20, 2021):

In this article, Zelenak considers the extent to which capital losses should be deductible under a mark-to-market regime applicable to the tradable assets of wealthy taxpayers, as advocated by Senate Finance Committee Chair Ron Wyden, D-Ore., in a 2019 paper.

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Aprill & Mayer: Tax Exemption Is Not A Subsidy — Except For When It Is

Ellen P. Aprill (Loyola-L.A.) & Lloyd Hitoshi Mayer (Notre Dame; Google Scholar), Tax Exemption Is Not a Subsidy — Except for When It Is, 172 Tax Notes Fed. 1887 (Sept. 20, 2021):

In this report, Aprill and Mayer argue that there is no uniform answer to the question whether a tax exemption is a subsidy, and they urge policymakers and exempt organizations to note the distinctions when changes to laws or other guidance regarding exemption are under consideration.

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Podcast: Feminism And The Tax Code

Tax Notes Talk | Podcast, Feminism and the Tax Code (Apple, Google):

Professors Bridget J. Crawford of the Pace University School of Law and Anthony C. Infanti of the University of Pittsburgh School of Law discuss viewing the U.S. tax code through a feminist lens.

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Manoj Viswanathan: The Professor Who Inspired Me To Love Tax

Philip Wolf (J.D. 2019, UC-Hastings; Tax Associate, Belcher, Smolen & Van Loo, San Francisco), Manoj Viswanathan: The Professor Who Inspired Me to Love Tax, 172 Tax Notes Fed. 1615 (Sept. 6, 2021):

Out of the thousands of different professions, how does one end up choosing tax? I can tell you exactly how it happened with me. During my second semester of law school, I was permitted to take one elective class. I selected basic income taxation. Although I knew nothing about the subject, I sensed it might somehow be helpful to my goal of starting a business one day. Little could I have imagined where the class would lead me!

In our first session, in walked the ebullient yet sincere professor, Manoj Viswanathan, or as he asked us students to call him, “Professor V.” Every lecture, Professor V. emphasized how everything we’d learn in his class would be practical and relevant in the real world. Time seemed to melt away in each Tuesday and Friday lecture, and I caught myself pondering what he’d said many hours after each class. It was Professor V.’s introductory tax class that would make me decide to change my career plans and become a tax lawyer.

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Blue J Predicts With 77% Confidence That Reserve’s § 501(c)(15) Appeal Will Be Dismissed By The Tenth Circuit

Benjamin Alarie & Bettina Xue Griffin (Blue J Legal), Captive Insurance Appeal in Reserve Mechanical Will Likely Fail, 172 Tax Notes Fed. 1431 (Aug. 30, 2021):

In this article, Alarie and Griffin examine the Tax Court’s decision in Reserve Mechanical [T.C. Memo. 2018-86] and the strength of its appeal on the issue of whether the taxpayer was exempt from tax as a valid insurance company under section 501(c)(15).

Conclusion
Blue J predicts with 77 percent confidence that Reserve’s appeal will be dismissed by the Tenth Circuit.

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Avi-Yonah: Gucci Gulch Redux—The Problems Of The Wyden Tax Reform Proposal

Reuven S. Avi-Yonah (Michigan; Google Scholar), Gucci Gulch Redux: The Problems of the Wyden Proposal, 172 Tax Notes Fed. 1417 (Aug. 30, 2021):

In this article, Avi-Yonah critiques a recent U.S. tax reform proposal that would overhaul the global intangible low-taxed income, foreign-derived intangible income, and base erosion and anti-abuse tax regimes.

Conclusion
The Wyden proposal states that it is “a starting point for conversations in the Democratic caucus on how to reform the international tax system to meet shared goals.” I would suggest that there is a much better starting point, namely the Biden administration proposal. On every point that the Wyden proposal is different than the administration proposal, it is inferior.

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Tax Fairness: In Search Of Justice And Representation

Alice G. Abreu (Temple), Jacqueline Laínez Flanagan (American) & Peter Mason, Tax Fairness: In Search of Justice and Representation, 172 Tax Notes Fed. 1457 (Aug. 30, 2021):

Global Roundtable is a regular series appearing in Tax Notes Federal, Tax Notes State, and Tax Notes International that brings together experts from each discipline to help advance the discussion of tax issues. In this installment, the authors examine the lack of racial diversity in the tax profession and built-in biases in tax policies and suggest ways to remedy the inequities.

Alice G. Abreu, Why Is Tax So White?:
Tax lawyers are crucial to the formulation and implementation of tax policy, and tax policy reflects the values and priorities of those who make it. But as Professor Rick Greenstein and I demonstrated in “Rebranding Tax/Increasing Diversity” (96 Denver L. Rev. 1 (2018)), the tax bar is much less diverse than the bar as a whole. This is especially disturbing because it is well known that the bar is much less diverse than the general population. And that lack of diversity may be contributing to the existence of tax law that disproportionately favors white taxpayers, directly and indirectly.

Jacqueline Laínez Flanagan, Seeking Tax Justice for Undocumented Immigrant Workers:

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Zelenak: The American Families Plan And The Future Of The Mass Income Tax

Lawrence Zelenak (Duke), The American Families Plan and the Future of the Mass Income Tax, 172 Tax Notes Fed. 1277 (Aug. 23, 2021):

In this article, Zelenak argues that enactment of President Biden’s American Families Plan would threaten the status of the federal individual income tax as a tax imposed on most of the population, and he explores the fiscal citizenship implications of an income tax system under which almost all adults file tax returns but only about half pay tax.

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Kaplan & Federici: The New Income Projection Rules For Defined Contribution Plans

Richard L. Kaplan (Illinois; Google Scholar) & Barry Federici, The New Income Projection Rules for Defined Contribution Plans, 172 Tax Notes Fed. 897 (Aug. 9, 2021):

The SECURE Act enacted at the end of 2019 requires that defined contribution retirement plans provide plan participants will projections of how much monthly income their accumulated balances will generate upon their retirement. This article analyzes the new Labor Department regulations that go into effect on September 18, 2021 and suggests various revisions, including an explanation of likely tax consequences.

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