David Herzig (Valparaiso) has published Am I the Only Person Paying Taxes? The Largest Tax Loophole for the Rich — Exchange Funds, 2009 Mich. St. L. Rev. 503.  Here is the abstract:

President Obama is faced with a national debt at over $11 trillion and needs to fund projects such as National Health Care with an ever shrinking tax base. As the economy has slowed, so have tax revenues. It would then make sense for the government to re-examine tax carve outs which only benefit the wealthy. In fact, President Obama is on record saying he wants to eliminate tax loopholes. After almost 50 years, it would appear ripe to eliminate one of the only congressionally authorized tax loopholes — the $30 billion Exchange Funds.

This article addresses the social equity arguments and the tax and economic theories to solve the perceived problem. The article thoroughly covers, through unique access to materials not previously seen before, including, fund private placement memorandum, the basics of fund details, fund formations, the tax rules, and the solutions to solve the social inequity.

This article not only proposes how to create legislation to tax the current arrangements but offers a creative solution utilizing current lode sections to tax these vehicles.