TaxProf Blog

Jeremy Babener (J.D. 2010, NYU) has posted Structured Settlements and Single-Claimant Qualified Settlement Funds: Regulating in Accordance with Structured Settlement History, 13 N.Y.U. J. Legis. & Pub. Pol'y ___ (2010), on SSRN.  Here is the abstract:

In 1982 Congress legislated a tax subsidy incentivizing the use of structured settlements. Since then the structured settlement has become a common conclusion for personal injury claims. Perhaps to the detriment of plaintiffs, it became clear early on that defendants and their liability insurers were capturing much of the benefits from structuring, including the value of the tax subsidy. While this usurpation may have lessened over time as plaintiff advisors became more knowledgeable about structured settlements, it continues today. In the 1990s, some plaintiffs began using an entity that allows for the prevention of defense capturing: the qualified settlement fund (QSF). Because the use of this fund by single-claimants breaks two important tax rules that Congress originally applied to the structured settlement tax subsidy – the constructive receipt (control of monies) and economic benefit (vested right in future distribution of assets or monies) doctrines — it is unclear if such claimants can make use of the QSFs and still access the subsidy. Treasury regulations could cure the ambiguity, but should do so in accordance with structured settlement history, and in the interest of public policy. By reviewing the legislative, administrative, and regulatory history of structured settlements, this paper demonstrates that the two tax doctrines no longer apply, at least not strictly, to structured settlements. Thus, upon a showing that extending the tax subsidy to structured settlements produced by single-claimant QSFs is in the interest of public policy, this paper recommends the issuance of Treasury regulations extending the subsidy.

Adam M. Leamon (J.D. 2010, Boston College) has published Section 108 of the I.R.C. and the Inclusion of Tufts Gain: A Proposal for Reform, 50 B.C. L. Rev. 1243 (209).  Here is the abstract:

The 1983 U.S. Supreme Court decision in Commissioner v. Tufts established the modern rule that requires a taxpayer to include the full amount of a nonrecourse note in the amount realized on the disposition of a property, notwithstanding the fair market value of the property. Although not fully understood at the time, this holding has had a large impact on the ability of a financially troubled debtor to defer cancellation of indebtedness income under § 108. Presently, § 108 allows a borrower who is insolvent or in a title 11 bankruptcy proceeding to defer the recognition of COD income, rather than recognize it as a gain. Under Tufts, when a property is transferred with a fair-market value below the nonrecourse debt used to purchase the asset, the taxpayer realizes a non-deferrable gain to the extent of the difference between the fair-market value of the property and the taxpayer's basis in the property. This Note argues that the IRS's treatment of nonrecourse debt and its application to § 108 is unworkable. By allowing an insolvent taxpayer to defer COD income while not allowing an identical taxpayer to defer gain from the discharge of indebtedness, the Service has disregarded the statutory purpose of § 108 and has violated the fundamental principles of equity and fairness in the administration of our tax system.

Jeffry S. Hinman (J.D. 2009, Oregon) has published The Green Economic Recovery: Wind Energy Tax Policy After Financial Crisis and the American Recovery and Reinvestment Tax Act of 2009, 24 J. Envtl. L. & Litig. 35 (2009).  Here is the abstract:

This Note explores the weaknesses that the recession has exposed in the United States’ current renewable energy tax policy and evaluates the 111th Congress’ legislative response to those weaknesses. In doing so, this Note looks at the major U.S. renewable energy tax policies of the last thirty years and investigates the effects of those federal policies on the wind energy industry. The focus on wind is not an endorsement to pursue wind energy over all other forms of renewable energy; rather, it is meant as a case study on how federal tax policy has effected one industry and how it can better encourage growth in that industry. Part I outlines the current state of the wind energy industry, its potential to grow, and the difficulties presented by the financial crisis, the recession, and fluctuations in prices for traditional sources of energy. Part II discusses the history, successes, and limitations of the federal renewable energy tax policies of the past thirty years, including a discussion of the Production Tax Credit (PTC) and the key renewable energy sections of American Recovery and Reinvestment Tax Act of 2009 (ARRTA). Part III suggests a comprehensive renewable energy policy that complements the significant accomplishments in ARRTA and clears the way for the wind industry to become a major player in the U.S. energy market.

Joshua D. Blank (Rutgers-Newark) has published Overcoming Overdisclosure: Toward Tax Shelter Detection, 56 UCLA L. Rev. 1629 (2009)   Here is the abstract:

Lawrence Lokken (Florida) has posted Tax Return Preparer Penalties on SSRN.  Here is the abstract:

The federal government does not directly regulate preparers of federal tax returns, but a tax return preparer is potentially subject to several penalties under the Internal Revenue Code if he or she fails to sign and retain records of returns prepared, is responsible for an unreasonable position on a return, or engages in willful or reckless conduct in preparing a return. The government may also petition a court for an injunction against improper acts by a preparer or an injunction forbidding a person from engaging in any tax return preparation activities. The Treasury, in response to changes in the statutes, recently restated its regulations under the preparer penalty provisions. The statutory and regulation changes have attracted much attention, particularly among tax professionals not engaged in return preparation in the conventional sense, because they impose higher standards on return preparers and make it clear that any tax advice leading to a position on a return causes an adviser to be a tax return preparer, even if the person never sees the actual return. This article, an excerpt from an upcoming revision of the treatise, Federal Taxation of Income, Estates & Gifts, discusses the preparer penalties under the current regulations.