Saturday, May 15, 2004
The Senate Finance Committee has posted a very helpful 34-page summary of the JOBS Act (S.1637).
Paul L. Caron
Dean
Pepperdine Caruso
School of Law
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TV Tax Trivia, Take Three: “Frasier” Finale
Friday, May 14, 2004
Following up on posts about the tax consequences of the Friends finale and Extreme Makeover: Home Edition, I offer here a TaxProf Blog guide to tax issues raised in the Frasier finale last night:
• Head of household filing status for Frasier while his father Martin lived with him?
• Marriage penalty for Martin and Ronee after they tie the knot?
• Medical expense deduction for Niles and Daphne when their vet delivers the baby?
• Casualty loss deduction for dog eating wedding ring (at least until it appears out the other end)?
• Moving expense deduction for Charlotte’s new job in Chicago?
• Tax planning for Roz as a result of her big promotion?
Intrepid TaxProf Blog readers are invited to send in more Frasier tax issues here!
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GOP Split on Paying For Tax Cuts
Friday, May 14, 2004
Interesting Washington Post article today on the split in the GOP ranks on requiring that tax cuts be paid for by spending reductions or tax hikes.
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Kirsch on Alternative Sanctions
Friday, May 14, 2004
Michael Kirsch (Notre Dame) has published Alternative Sanctions and the Federal Tax Law: Symbols, Shaming, and Social Norm Management as a Substitute for Effective Tax Policy, 89 Iowa L. Rev. 863 (2004). Here is the abstract:
On several occasions in the past decade, when confronted with taxpayers taking advantage of the Internal Revenue Code in ways that Congress considered objectionable, Congress responded in an unusual way. Rather than merely modifying the Internal Revenue Code to alter the tax consequences of the taxpayer’s actions, or imposing traditional civil or criminal penalties on the taxpayer, Congress turned to alternative sanctions. For example, in response to United States citizens who renounce citizenship to avoid taxes, Congress enacted public shaming provisions that require publication of the individuals’ names in the Federal Register and modified the federal immigration laws to banish the former citizens from re-entering the United States. Similarly, in response to United States corporations that reincorporate abroad to reduce United States tax liability, Congress enacted legislation purporting to ban the corporation from entering into future government contracts. This Article, relying primarily on the public shaming and immigration-law banishment provisions applicable to individuals who renounce citizenship to avoid taxes, analyzes the alternative sanctions from three perspectives: their instrumental effects, their expressive function in altering social norms, and their role as symbolic legislation. This Article concludes that alternative sanctions, when used to deter or condemn behavior for which the tax code provides a tax benefit, produce significant instrumental, expressive, and symbolic problems. This Article suggests a narrower role for alternative sanctions, as a limited tool of tax enforcement, that might avoid these problems.
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Yet More on Extreme Makeover = Extreme Taxes
Friday, May 14, 2004
Following up on this week’s TaxProf Blog posts (see here and here) on Newsweek’s discussion of the tax consequences of ABC’s plan to help the recipients of home makeovers avoid tax on the value of the improvements by characterizing the items as short term rental payments within the meaning of Code section 280A(g), two Tax Profs report that they use very similar fact patterns in their tax books:
From Gail Levin Richmond (Nova), Federal Tax Research (Foundation Press, 6th ed. 2002):
Your client was approached by a movie producer, who wants to film her home. He is interested only in the home’s façade; he will film interior shots at the production company’s studio. The producer offered your client rent for “camping out” on her lawn. Although he believes he will need only two days, he has offered $7,000 for ten days or $12,000 for twenty days. Find any tax provisions concerning the short-term rental of a home. Discuss how these apply to the time periods involved and to renting the façade only. What advice do you give your client?
From Sam Donaldson (Washington), Federal Income Taxation of Individuals (West, forthcoming 2004):
On the television show “Trading Spaces,” neighbors agree to switch homes for 48 hours and completely redecorate one room in the other’s house. They are assisted by a professional designer and a carpenter. The designer and the neighbors are limited to a budget of $1,000, furnished by the producers of the show.
Suppose that Ricky and Lucy Ricardo, a married couple, agree to appear on the show with their neighbors, Fred and Ethel Mertz, also married. Ricky and Lucy remodeled the kitchen in the Mertz home with the assistance of designer Laurie Hickson-Smith. Meanwhile, Fred and Ethel remodeled the living room in the Ricardo home with the idle assistance of designer Doug Wilson. Amy Wynn Pastor served as the carpenter for both projects.
Because of Laurie’s expert eye and good taste, and because of the Herculean efforts of Ricky and Lucy, the Mertz home increased in value by $5,000. On the other hand, Doug’s awkward sense of style and penchant for clashing colors caused the value of the Ricardo home to increase by only $1,000, the cost of the materials used to make the “improvements.” Without the skills of Amy Wynn, the Ricardo home might have even lost value!
Assuming that Laurie and Doug both charge their normal customers $10,000 for two full days of advice and assistance, what are the federal income tax consequences to Ricky, Lucy, Fred, and Ethel?
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Washington University Mini-Course on Conducting Empirical Legal Scholarship
Thursday, May 13, 2004
Nancy Staudt (Washington University) is one of the featured faculty at the Mini-Course on Conducting Empirical Legal Scholarship held May 11-13 at Washington University. Other (non-tax) faculty conducting the program are Lee Epstein, Pauline Kim, Andrew Martin, and Katherine Barnes.
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Guest Blogger Don Leatherman Reports on Affiliated & Related Corporations at ABA Tax Section Meeting
Thursday, May 13, 2004
Guest Blogger Don Leatherman (Tennessee) shares his PowerPoint slides of the talk he gave at the Affiliated & Related Corporations panel at the ABA Tax Section May Meeting in Washington, D.C. Here is an overview of the presentation from the first slide:
• Proposed Legislation
• 2003-2004 Priority Guidance Plan
• Section 1504 & Value Fluctuations
• Final §1.1502-31, Stock Basis After a Group Structure Change
• Consolidated worthless stock deduction rules
• Administration of §1.337(d)-2T
• Other Matters
• Consolidated §108(b)
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New Report Says Federal Policies Worsen State Fiscal Problems
Thursday, May 13, 2004
The Center on Budget and Policy Priorities has released a report, Passing Down the Deficit: Federal Policies Contribute to the Severity of the State Fiscal Crisis. As the accompanying press release explains:
Federal policies that impose new costs on states and restrict state revenues have deepened the state fiscal crisis, a new report from the Center on Budget and Policy Priorities finds. The report is the first to provide state-by-state data on the budgetary damage these policies have caused. In all, added costs and lost revenue total $175 billion over fiscal years 2002-2005, or an average of 8.4 percent of total state general fund budgets.
The report describes four types of federal policies that are harming states:
Recent federal tax cuts. Some of the federal tax cuts enacted in 2001, 2002, and 2003 are reducing state revenues because of linkages between the federal and state tax codes.
Federal restrictions on state sales taxing authority. Federal law bars states from taxing access fees for Internet service. Also, two Supreme Court decisions prevent states and localities from collecting sales taxes on most catalog and Internet purchases.
Unfunded mandates. In areas such as the No Child Left Behind education law, the federal government has imposed new requirements on state and local governments without providing adequate funding.
Shifting health care costs. In recent decades, some of the cost of caring for low-income elderly and disabled people has shifted from Medicare (which is fully federally funded) to Medicaid (where states pay nearly half of all costs) because Medicaid includes prescription drug coverage but Medicare does not. Under the recent Medicare bill, Medicare will begin providing drug coverage to these individuals in 2006, but states are required to return the bulk of their savings to the federal government.
The combined cost of these policies — $175 billion over fiscal years 2002-2005 — dwarfs the $20 billion in federal fiscal relief that was enacted in 2003.
For a 1-page fact sheet, see here. For the full 50-state breakdown, see here.
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Differences Between House and Senate Tax Bills
Thursday, May 13, 2004
Donald Tobin (Ohio State) passed along a very helpful 6-page document given to the House Ways & Means Committee on the differences between the House and Senate versions of the Jumpstart Our Business Strength (JOBS) Act.
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