Loyola University New Orleansebls/Outlines Q-T/taxlawfedincom… · Web viewP's mother at hotel...

FEDERAL INCOME TAX — FALL 1995 OUTLINEProfessor Abreu/ Graetz & Schenk 3d Ed

Key: B/# -- page in casebookN/# -- page in notesO/# -- page in reading notes outline

I. IncomeA. What is income

1. §§ 61, 71-90 (additions) and § 101-36 (exclusions)2. Haig-Simons definition: "personal income may be defined as the algebraic sum of (1) the market value of rights exercised in consumption and (2) the change in value of the store of property rights between the beginning and end of the period in question (B/107) (N/3)

a. problems of administration of that definition:(1) what about property devaluation (e.g., car value depreciation) --who decides the value of one's property rights(2) liquidity — without a sale of one's property, an individual may not have available cash to pay for tax on the property, even though the assessed value has increased

3. Comm'r v. Glenshaw Glass (S.Ct. 1955) (B/108)(N/4)a. H: punitive damages rec'd were included in gross incomeb. 3 part test (to determine what's income)

(1) an accession to wealth (is Δ richer?)(2) clearly realized (has some event happened such that Δ has rec'd the money)(3) complete dominion (does the Δ have a choice about how to spend it)

(a) even though you may have credit liabilities, you incurred those liabilities voluntarily

B. Compensation for Services (§61)1. includes: wages, salaries, fees, commissions, fringe benefits, royalties,

percentage of profits, tips, legal and medical fees2. not necessary for there to be an employer-employee relationship3. form of payment irrelevant (e.g., stock, notes, property, etc.)

a. value = fair market value (fmv) of the transferred itemb. Old Colony Trust Co. v. Comm'r (S.Ct. 1929) (B/109)(N/5)

(1) R: Employer tax payments considered additional compensation (THUS: taxable)(2) b/c of equity concerns, have to treat Π (Wood) as if he'd rec'd the $681,000 and $351,000 (amts of taxes paid directly by his company, but on his behalf)(3) didn't matter that Wood had never touched the money(4) instead, crucial that his company was willing to pay him if he asked

(a) he still rec'd a benefit from that $(b) this money was paid in compensation of his being a valued officer of the company

(5) if Π had won, he would have been in a lower tax bracketc. § 275 denies any ded'n for federal income taxes (B/111)

(1) THUS: Tax-inclusive system(2) THUS: if earned $100 in income, but $20 was withheld for federal income

(a) your tax bracket would be based on the $100(b) NOT on the $80 you actually rec'd

d. Progressive Tax Rate Structure: (N/6)

Tax Rates 39.6%

36%

E -- highest marginal rate is only paid on this segment of income

31%D will always pay 36% on this

segment

28%C will always pay 31% on this

segment

15%B will always pay 28% on this

portion

0%A will always pay 15% on this

amount

$22.1K $53.5K $115K $250K

Taxable Income (See § 1(c))

(1) A is taxed at a 15% marginal rate-- B is taxed at a 28% marginal rate

(2) marginal rate: rate of tax that you pay on your last dollar of income

(a) e.g., if you earned $22,101, would pay 15% on $22,100 of it, and 28% on the last dollar

i) THUS, 28% is your marginal rate(3) taxable income = gross income — deductions

\ can be lowered through exemptions

Federal Income Tax Outline

4. Fringe Benefits (fbs) (§§ 132, 119, 117, 79, 105, 106, 107, 125, 127, 129)(B/112)(N/9)

a. loose definition: in-kind benefits transferred to an employee(1) may be clearly additional compensation or essential to the performance of the employee's job(2) PATTERN: whenever an employer provides an economic benefit to an employee, there is a possibility of finding income

(a) esp. when employer's motive is compensatory(b) eg., cash reimbursements (they look an awful lot like compensation)

b. LIMITATION: § 132(j) Non-discrimination provision(1) applies ONLY to 132(a)(1) [no add'l cost svc] and (2) [qualified employee discount]

c. many fbs are not taxable solely b/c Congress has chosen to treat them speciallyd. equity concerns:

(1) (horizontal) equity requires the treatment of taxpayers in similar economic situations similarly

(a) e.g., A rec'vs $15,000 cash, B rec'vs $10,00 cash and $5,000 in tax-free airfare (violates equity, but not so much so that the law has changed)

e. efficiency(1) if income tax is to raise a certain amt of revenue, exclusion of fbs requires higher tax rates

f. complexity(1) inherent difficulty in distinguishing in-kind compensation from goods/services related to an employee's work which also provide a benefit

(a) e.g., a free book to a book critic would be an incident of employment -- whereas that same book to a mechanic would be non-cash compensation

(2) Congress is unwilling to accept the principle that all non-cash compensation designed to reward the employee for services rendered should be subject to income tax

g. Work-Related Fringe Benefits(1) no fb (other than de minimis) is excluded if another section of the code provides rules for the tax treatment of that general type of benefit(2) § 132 — excludable fbs

(a) no additional cost services(b) qualified employee discount (based on employer's profit margin)(c) working condition fringe (professor's office)(d) qualified transportation fringe (orig -- exclusion for parking)(e) moving expense reimbursement


(3) two objectives for providing for fbs tax-free in Code(a) many industries have long-standing practices that employees may receive certain products (services) that the employer provides to the general public(b) provide clear boundaries for the provision of tax-free benefits

(4) "working condition benefits" — regarded as primarily for the benefit of the employer, and therefore not includable in the income of the employee (B/119)(5) valuation: standard is that the amount of value of fbs is fmv(6) U.S. v. Gotcher (5th Cir. 1968) (B/122)

(a) husb & wife to Germany at VW's request.(b) H: Gotcher's trip was NOT income -- wife's trip was(c) R: Meals & lodging not taxable if they are primarily for the convenience of the employer (d) R: taxable only when the payment of expenses serves NO LEGITIMATE PURPOSE(e) if, however, Gotcher got a prize of the trip to Germany, his trip would be income

h. Meals & Lodging(1) Comm'r v. Kowalski (S.Ct. 1977) (B/127)

(a) state trooper -- sought meal allowance to be excluded(b) I: is cash allowance equal to value of meals(c) H: NO. § 119 applies only to meals furnished, not to cash reimbursements for meals

i) this was no Congressional oversight(d) justification for difference: lack of employee choice

i. § 83 (property transferred for services) (N/13)(1) e.g., stock options(2) BUT -- if there are restrictions on it, then non-compensatory purpose is there

(a) eg., risk of forfeiture (b) employer's purpose = golden handcuffs

j. Tax Expenditure Fringe Benefits (N/7)(1) Budget: list of money that Feds are not collecting b/c it's providing an exclusion, ded'n or other benefit(2) cost to Fed government of providing certain benefits(3) on an equity basis these expenditures fail (do not treat similarly-situated people similarly)(4) table of tax expenditures (B/46-7) (N/8)

5. Interest-Free Loansa. § 7872 (definition of treatment of loans w/ below-market interest rates)

C. Imputed Income1. definition: the benefits derived from labor on one's own behalf or the benefits

from ownership of the property


2. excluded from income a. results in similarly-situated tps paying different taxb. reasons for not taxing

(1) conceptually: impossible to know where to stop(2) practically:

(a) no political wisdom in a rule no one would understand or accept(b) valuation and record-keeping nightmares(c) privacy concerns implicated if the Service had to enforce compliance in accounting for services performed for one's self

3. most significant form: imputed rental-value of owner-occupied homesa. e.g., if rented out house instead, would earn $600/mob. THUS $600/mo is income

D. Gifts & Bequests -- § 1021. Gifts (not income --> excludable)

a. CLEAR that employer gifts to employees are NOT excluded § 102(c)(1) such a transaction may be a de minimis fringe

b. Tips -- taxable income (Reg § 1.61-2(a))(1) collection has proven difficult b/c of reporting insufficiencies

c. support and government transfer payments(1) support provided by family members, like intra-family gifts, is NOT included in gross income(2) long-standing policy of IRS to exclude most government benefits and other welfare payments

(a) BUT, Congress can clearly choose to tax such paymentsd. political contributions: not taxable if used for expenses of a political campaigne. prizes: generally must be included

(1) § 74, however, excludes certain onesf. § 102 has been used to push a determination of the factsg. Comm'r v. Duberstein (S.Ct. 1960) (B/138)

(1) R: "gift" in § 102 proceeds from a detached and disinterested generosity, out of affection, respect, admiration, charity, etc(2) DONOR'S INTENT IS KEY

h. GIFT TAX: max $10,000 each/ per donee (N/15b) 2. Bequests

a. Wolder v. Comm'r (B/148-9)(N/15b)(1) creative attempt to avoid tax(2) calling it a "bequest" is not enough(3) attempt to defer compensation of the attorney

3. Scholarships & Fellowshipsa. § 117: exclusion is limited to amounts used by degree candidates for "qualified tuition and related expenses"


E. Capital Appreciation and Recovery of Basis1. Capital Recovery & Basis

a. definitions(1) gross income = total sales less the costs of goods sold (Reg. 1.61-3)(2) § 61(a)(3) indicates gain from dealings(3) § 1001 --> determines amount of gain(4) § 1001(b) amt realized = any cash rec'd + fmv of any property rec'd

2. Determining the Basis of Propertya. definitions

(1) § 1011 adjusted basis(2) § 1012 basis = cost (except as otherwise provided)

(a) not helpful if you don't buy the property(3) § 1014 property transferred by death(4) § 1015 property transferred by gift(5) § 1016 adjustments to basis

b. initial investment should not be taxed, just the interest or other gain resulting from that investment

(1) ensures that you will be taxed at least (but no more than) once on that amount

c. basis = cost even when tp has overpaid/underpaid for property(1) if property is purchased at less than fmv, purchaser takes cost basis

(a) is not taxed on gain until disposal of property(2) if property is purchased at over fmv, basis = amt paid, and loss will be realized only when sells property at fmv

d. Basis of Property Acquired by Gift(1) basis will be same as in hands of donor § 1015(a)

(a) "carryover basis"(b) only with respect to appreciation of gift is tax deferred

(2) formula: gain (or loss) = amt realized at sale — basis(3) gift of cash = entire amount is excluded under § 102

(a) basis of cash = face value of cash(4) of LOSS

(a) basis = either donor's basis or fmv at gift (whichever is lower)(b) exceptions within § 1015(c) CHOICE ONLY APPLIES IF A LOSS(d) IF GAIN, BASIS IS ALWAYS COST

e. Basis of Property Acquired From a Decedent(1) basis = fmv of property

(a) "stepped up" basis = gain ("stepped down" basis = loss)


(b) avoids problem of trying to determine donor's basis (could have been purchased 50 years ago, with no receipt -- incredible hassle)

(2) formula: gain (or loss) = amt realized at sale — basis3. Adjusted Basis

a. §§ 1001(a), 1011, 1016 b. certain items are reflected as adjustments to basis

(1) eg. capitalized expenditures(2) untaxed receipts(3) certain losses(4) depreciation

4. Allocation of Basisa. esp an issue where tp sells less than the whole interest in the assetb. two ways to handle such a transaction

(1) cld apply amt realized against basis for entire property & not report any gain until the aggregate realized exceeds entire basis; OR(2) allocate basis amg the part sold and the part retained in some reasonable manner

c. Hort v. Comm'r (S.Ct. 1941) (B/157)(1) tp rec'd property by devise; sold lease for $140K. IRS considered it unreported income(2) H: b/c TP had no basis in the lease (only had basis in building — the lease cost him nothing) had a gain of $140K

(a) wasn't selling land (where would have basis equal to donor's)

F. The Realization Requirement1. Amts do not need to be rec'd in cash to be included in gross income under §61

a. fmv of property rec'd is often included in income at the time of the receipt2. NOT interpreted to include unrealized APPRECIATION in income3. time of realization is not always clear4. tps have considerable flexibility in the timing of taxation of gains & losses

5. deviations from requirementa. bond holders: req'd to include in income annually an interest amount (known as "original issue discount")b. certain stock/stock-option transactions

(1) subj to mark-to-market rule(a) req's tps to include all unrealized gains and losses from straddle Ks

6. in many instances, this realization requirement violates horizontal equity 7. Windfalls

a. Cesarini v. U.S. (N.D Ohio 1969) (B/161)(1) TPs bought piano for $15, found $4,400 in cash inside(2) H: windfall cash is income(3) R: 1964 Treasury Reg states specifically that treasure troves are income — dispositive of this issue


(4) extra asset: fact that you can sever the cash from the piano shows that there is realization in the cash(5) see class hypos (N/18b)

b. Haverly v. U.S. (7th Cir. 1975) (B/163)(1) R: Can't deduct income without first realized it as income(2) Principal rec'vs review copies of books. Donates them to charity. Claims charitable ded'n in the amount of the books(3) I: Whether the value of the unsolicited textbooks was income(4) H: YES. It's income b/c he claimed a ded'n(5) Justification: want to avoid a double benefit to the taxpayer(6) R: The act of claiming a charitable ded'n does manifest an intent to accept the property as one's own (intent to exercise complete dominion)

c. Cottage Savings Ass'n v. Comm'r (S.Ct. 1991) (B/170)(1) R: An exchange of property results in a realization event under § 1001(a) only if the properties exchanged are materially different (2) S&Ls exchanged participation in mortgages -- which their regulating agency claims are not realization events for agency's purposes. S&Ls claim a loss on taxes.(3) H: S&Ls realize a loss on taxes even though it is not a loss for the FHLBB purposes(4) R: "Materially different" is met so long as the owners enjoy legal entitlements that are different in kind or extent as a result of the exchange

(a) ring/cash is materially different and severable from what you thought you had -- a piano(b) BUT, getting something at a bargain does not mean you realized a gain (until you sell it)

G. Annuities and Life Insurance (only generally) (N/19b)1. Annuities

a. payer of policy is also recipientb. proceeds

(1) some portion is return of capital(2) some portion is income

c. § 72 -- need to determine how much of proceeds represents income/growth element of the investment

2. Life Insurance Proceedsa. § 101 excludes life insurance proceeds from income of recipientb. policy

(1) proceeds are a result of premiums(2) taxes have already been paid on the amount you sent in for premiums (b/c they were income from salary before you paid insurance co)

H. Borrowed Funds (N/19b)1. Loans and Discharge of Indebtedness Income


a. under current tax system, loans not income b/c they didn't change the balance sheet (even though have asset of $1, also have liability of $1)b. no ded'n allowed when making principal payments on the loanc. lender will earn income on the transaction in the form of interest

(1) borrower still does not get a ded'nd. Discharge of indebtedness

(1) if certain portion of loan is forgiven, tp (borrower) will have income

(a) rationale for not including loan money as income was b/c had an offsetting liability(b) when this changes, then will have income b/c no longer have the same offsetting liability

(2) exceptions for income inclusions are in § 108(a) student loans discharged in part b/c student worked for public interest firm wld be excludable from income §108(f)(b) if payment of loan wld give rise to a ded'n § 108(e)(2)(c) considered a reduction of purchase price § 108(e)(5)(d) if tp is insolvent or in bankruptcy § 108(a)

e. Zarin v. Comm'r (Tax Ct. 1989) (B/184)(1) Zarin rec'd $3.4 mil credit to gamble at Resorts. Only repaid $500,000. IRS claims difference in amounts was income and should be taxed(2) H: agreed. Acc'ding to § 61(a)(12), forgiveness of indebtedness was income(3) R: value rec'd in exchange for the credit does not constitute the type of property excluded by § 108(e)(5) -- thus, no exclusion for this income(4) on appeal to 3d Cir, rev'd unanimously

(a) b/c contested liability doctrinei) debt was not enforceable in NJii) thus its cancellation was not income

(b) b/c chips were not property (dicta)I. Effect of Debt on Basis and Amount Realized (O/4b)

1. many tps finance acquisitions with debta. the basis of such assets must be determined to assess the tax consequences

2. type of borrowinga. recourse debt: borrower is personally liable for repayment of the debtb. non recourse: where it borrower is not personally liable

3. Total amount of income from certain property transactions will be same whether mortgage debt is included in both basis and amount realized or excluded from both

a. difference is in timing tax liabilitiesb. Comm'r v. Tufts (S.Ct. 1983) (B/195)

(1) non-recourse mortgage secured for the building. suffered market losses, sold building to 3d party, who assumed the mortgage


(2) I: Does tp have to include the unpaid balance of a mortgage in computing the gain realized in the sale(3) H: Yes. B/c tp claimed that amount in claiming a loss ded'n. FMV is irrelevant to the calculation(4) Recourse and Non-Recourse loans are treated the same for tax purposes

(a) see Crane v. Comm'r (B/194)(5) interest payments are considered separately (can sometimes be ded'ble)

J. Illegal Income (N/23)(O/5b)1. Rationale for taxing this:

a. shouldn't give tax benefit to thieves when taxing law-abiding citizensb. enforcement of non-tax criminal issues

(1) Al Capone(2) resignation of Spiro Agnew as VP of US

2. Yet, reporting illegal income not inconsistent with 5th Amendmenta. Tax agents couldn't care where the income comes from, just that you pay taxes on itb. thus, have to use separate line "other income"c. tp is not required to reveal the source of illegal income

3. Collins v. Comm'r (2d Cir. 1993) (B/211)a. § 165b. OTB dealer, illegally issued $80,000 in tickets to selfc. H: illegal gains are taxable to their full amount

(1) any restitution paid may be ded'ble in the year paid § 165d. gambling losses are irrelevant unless being ded'd to offset gambling gains

4. Consensual agreement (James case)a. must be a consensual agreement/ recognition of an obligation to repayb. claim for taxes has priority over victim's claim for stolen funds § 6321

5. Embezzlement v. Loansa. Hobson v. Comm'r (1992)

(1) Court interpreted James to apply only when embezzler personally benefited from the funds

K. Damages1. Difficult, but important, to distinguish between business and personal damages

a. Code — prefer'l treatment for certain personal dmgs (N/23b)(O/6)2. To Business Interests

a. tax consequences of a compensatory damages award or reimbursement depend on the tax treatment of the item for which the reimbursement is intended to substitute

(1) reasoning: b/c profits would be taxable income, proceeds of litigation which are their substitute are taxable in like manner

b. where tp receives an amount to compensate for loss of property that has an adjusted basis, the amt of income is the extent to which the amt received exceeds his adjusted basisc. where tp receives an amount to compensate for lost profits, no basis


(1) entire amt is taxable(2) similarly, punitive damages are entirely taxable

(a) see Glenshaw Glass (B/220)d. where tp settles a claim for dmgs, it must be determined for what she is being compensated

(1) if tp can reasonably establish that the actual dmgs exceeded settlement, then there will be no income

e. note that § 183 permits tp to reduce taxable damages to reflect earlier losses that they have not been able to deduct fully

3. For Personal Injury (N/24)a. § 104(a)(2) excludes from income "the amount of any damages received on account of personal injuries or illnessesb. non-physical injuries may be personalc. interest is not included as damagesd. U.S. v. Burke (S.Ct. 1992) (B/222)

(1) Employment discrimination Π attempted to exclude compensatory damages rec'd for back pay(2) H: Backpay awards are not excludable b/c they would have been taxable if the discrimination had not existed (wld have been taxed as wages)

(a) they look like K remedies(3) Ct. found that tps must show that Title VII (the legal basis for their remedies) redresses a tort-like personal injury

(a) under this version of Title VII, only contract-like remedies were allowed

e. Post-Burke IRS Ruling 1993 (B/225)(N/26)(1) less authoritative than a Reg.(2) as a result of change in Title VII, providing alternative remedies (like those provided for torts)(3) IRS ruled that compensatory damages, including back pay, received under Post-1991 Title VII act for gender discrimination are excludable as damages for personal injury(4) Courts have split as to the damages received under the ADEA (age discrimination in employment act)

f. Comm'r v. Schleier (S.Ct. 1995) (Handout--USLW)(1) Schleier won settlement from employer under ADEA, comprising back pay and liquidated damages. Paid taxes only on back pay amounts. IRS claimed deficiency(2) H: Tp not able to exclude either, because this settlement was not related to personal injury and the recovery is not based on tort-type rights. THUS, not excludable under § 104(a)

(a) Court focussed on the trigger for the discharge -- the birthdate

i) which wasn't an injury(3) Test: was the injury "on account of personal injury or sickness"


(a) made "personal injury" almost synonymous to physical injury only

g. § 104(a)(2)(1) actually, physical v. non-physical damages distinction was made only with respect to punitive damages

(a) see flush language(2) for justifications for § 104 exclusion, see O/7

(a) taxing awards for pain & suffering is offensiveh. Sept 1995: following Schleier decision

(1) withdrew that 1993 ruling(2) thus Title VII compensatory damage awards are NOT excludable(3) not clear yet whether it will be retroactive

II. Deductions and CreditsA. Introduction

1. economic value of deductions: multiply amount of deduction by marginal tax ratea. will find that ded'ns do not have a dollar for dollar valueb. exclusions, on the other hand, do

2. for CORPORATIONSa. allowable ded'ns serve to reduce gross income to get taxable income

3. for INDIVIDUALS (more complicated)a. start with gross incomeb. subtract above-the-line ded'ns (§ 62) ====> get adjusted gross income (AGI) -- NOT SUBJECT TO 2% FLOOR § 62c. subtract itemized ded'ns below-the-line

(1) only allowable to extent they exceed the std ded'n § 63(c)(2) only the amount of misc itemized ded'ns that exceeds 2% of tp's AGI may be deducted § 67(a)

(a) OTHER THAN (none are subject to 2% floor)i) 163 (interest)ii) 164 (taxes)iii) 165(a) (losses in (c)(3) or (d))iv) 170 (charitable contrib's and gifts)v) 213 (medical)vi) impairment-related work expensesvii) 691(c) (estate tax)viii) personal property used in a short saleix) 1341 (?)x) 72(b)(3) (annuities) xi) 171 (amortized bond premiums)xii) 216 (housing coops)

(b) WOULD INCLUDE


i) unreimbursed employee business expenses (which are NOT above-the-line)ii) b/c reimbursed employee business expenses are included in 62(a)(1) and are above-the-line

(3) subject to limitation -- hits highest income bracket § 68(a)(a) 3% of excess gross income above $100,000, OR(b) 80% of total itemized ded'ns

d. also get personal exemption § 151B. Business Expenses (Deductible -- Ded'ble)

1. § 162 (trade or business expenses)a. above the line ded'nsb. allows ded'n of all ordinary & necessary expenses paid or incurred during taxable year in carrying on a trade or businessc. e.g. employee wages, annual insurance premiums on business assets, office rent, utilitiesd. justification: if tax policy is to tax income

(1) then inappropriate to tax costs in producing the income2. § 212 (production of income)

a. permits indivs to deduct expenses stemming from non-business, non-trade eventsb. applies ONLY to individualsc. only a ded'n from AGI to obtain taxable income (below line)d. subject to 2% floor

3. distinctions require inquiry into "trade or business activity"a. Higgins (B/235)(N/30)

(1) defines trade or business(2) H: an independent investor could not treat the management of his own investments as a trade or business

(a) even with an office(b) even with a secretary

b. Comm'r v. Groetzinger (S.Ct. 1987)(1) H: a professional gambler engages in a trade if involved in the activity with continuity and regularity (2) Test

(a) activity must be continuous and regular (b) primary purpose of earning income or profit

i) even if no sale of goods or services4. § 165 permits ded'ns for losses incurred in trade or business5. Welch v. Helvering (S.Ct. 1933) (B/236)

a. Tp, employee of company which becomes bankrupt. Welch pays some of co's debts in order to solidify his reputation and good will. Welch claims these were capital expenditure; IRS says ordinaryb. H: It is not "ordinary" to cover someone else's debts. Also, necessary means "merely appropriate and helpful"c. Welch is benefitting his reputation


(1) has benefits beyond this current yeard. his expenses are NOT ded'ble

6. Gilliam v. Comm'r (Tax Ct. 1986) (B/239)a. artist flew to an exhibition, and on way there, had nervous breakdown, injuring another passenger. Claimed legal fees as business deductionb. H: Where, as here, expenses are not ordinary expenses of tp's trade or business, they are not deductiblec. R: Travel not itself the conduct of artist's trade or businessd. Neither the altercation nor the expenses were undertaken to further Gilliam's career

7. U.S. v. Gilmore (S.Ct. 1963) (B/242)a. Test = origin of the claimb. eg., if origin of claim is personal, then so are legal fees

(1) and, thus, non-deductiblec. if origin of claim is business, perhaps deductible

8. Expenses Contrary to Public Policya. Comm'r v. Tellier (S.Ct. 1966) (B/251)

(1) Tellier convicted of fraud, and attempted to claim legal fees connected with his defense as ded'ble business expenses. (2) H: Can be ded'ble. Tax Code is not concerned about the origin of tp's income, only that tax is paid upon it. To disallow a ded'n would be to potentially increase the punishment using the tax code(3) ded'n here met plain language of the statute, but IRS claimed that allowing it as a ded'n would violate public policy(4) HIGH STD ADOPTED:

(a) allowing ded'n must frustrate sharply national or state policies(b) policies frustrated must be declared by government(c) frustration must be severe AND immediate

b. See O/8b for more discussionc. § 162 amended to deny 5 types of expenditures

(1) fines paid for violation of any law § 162(f)(2) portion of treble damages under anti-trust laws § 162(g)(3) bribes or kickbacks § 162(i)(4) Medicare bribes or kickbacks(5) see also § 162(c) -- other bribes & kickbacks

d. § 280E denies any ded'n for business expenses related to illegal drug traffickinge. O/9b discusses the limits of this analysis

9. Employee Business Expensesa. determining the amount of the allowable ded'n

(1) ded'ble employee expenses § 162(a) ordinary & necessary in carrying on trade/business(b) issue often is whether they are actually personal exps.(c) professional expenses ded'ble § 162

i) eg. supplies, dues to professional societies, etc.


(2) itemized ded'ns(a) key is whether employer reimburses those expenses

i) reimbursed expenses ded'ble above-the-lineii) all unreimbursed are ded'ble ONLY if employee itemizes (below-the-line)iii) self-employed independent contractor can deduct all business expenses above the line § 62(a)(1)

(3) 2% floor(a) acc'ding to Regs, 2% limit can be ignored for purposes of § 132(b) this rule, combined with fact that reimbursed expenses are above-the-line, has resulted in pressure on employers to reimburse expenses

C. Non-Ded'ble Personal Living or Family Expenses1. Introduction

a. Congress has limited mixed-motive expenses (ded'ns) in order to raise revenue

(1) § 280A (disallowing ded'n related to home office and vacation homes)(2) § 280F (limiting depreciation ded'n)(3) § 183 (hobby limitations)

b. also, restrictions on ded'bility of travel & entertainment expenses b/c of their large consumption element

(1) § 274(n), (m), (k), (l)2. In general

a. Trebilcock v. Comm'r (Tax Ct. 1977) (B/265)(1) Tp hired minister to conduct prayer meetings and heighten spiritual awareness on the job(2) H: Tp failed to prove that minister's method of providing business advice (praying) was ordinary.(3) R: Services provided by ministers are inherently personal in nature, and disallowed as a ded'n

b. Pevsner v. Comm'r (5th Cir. 1980) (B/267)(1) Manager of Yves St. Laurent Boutique ded'd cost of clothes as a business expense(2) H: Although these expenditures may be helpful or essential, they are considered inherently personal and disallowed under § 262(3) Clothing only ded'ble if

(a) of a type specifically req'd as a condition of employment(b) not adaptable to gen'l usage as ordinary clothing(c) it is not worn off the job

(4) Adaptability for personal/general use depends upon what is generally accepted for ordinary street wear

(a) OBJECTIVE TEST(5) Even if get this clothing ded'n -- would be subject to 2% floor


c. Domestic Services and Childcare(1) consult O/10b for this discussion (omitted here)(2) § 21

3. Travel Away from Homea. Transportation Expenses

(1) § 162(a)(2) allows ded'n (2) cabfare from Tp's law firm to courthouse would be ded'ble(3) contrast with Rule that cost of commuting to and from work are non-ded'ble personal expenses

(a) location of office is fixed(b) decision to live beyond walking distance is a personal one

(4) McCabe v. Comm'r (2nd Cir. 1982) (B/272)(a) NYC Cop req'd to carry gun off-duty. Lived in NYS. Quickest way to work was through NJ, but NJ req'd gun permit. Cop tried to deduct commuting expenses(b) H: Tp's increased costs are a result of his personal reasons to live away from work(c) Exception: Additional expenses may at times be incurred for transporting job-required tools and materials to and from work

(5) General Rule: A transportation expense between the tp's residence and regular place of work is a non-deductible commuting expense

(a) BUT, transportation expenses incurred between tp's residence and a temporary place of business ARE ded'ble

(6) Luxury expenses(a) even when tp travels on business, the style of transportation may be so luxurious as to produce clear personal benefits

b. Food and Lodging(1) U.S. v. Correll (S.Ct. 1967) (B/277)

(a) H: Congress speaks of "meals and lodging" as a single unit, thus contemplates a deduction for meals only where travel involved lodging as well(b) Thus, IRS's "sleep or rest required" rule is valid

(2) Hantzis v. Comm'r (1st Cir. 1981) (B/279)(a) Boston law student got summer job in NYC. Ded'd cost of apartment, meals and travel expenses between Boston & NYC as business trip(b) R: Whether trip is business or not depends on where your home is(c) H: ded'n denied on basis that expenses were not incurred "while away from home"

(3) Flowers test: travelling expenses are ded'ble only if they are(a) reasonable & necessary


(b) incurred while away from home(c) necessitated by exigencies of business

(4) House not necessarily a home(a) IRS says home is where you work

i) long defended this(b) "Home" for purposes of § 162(a)(2) is the tp's regular or principal place of business(c) if no principal place of business, then his "tax home" is regular place of abode(d) if no regular place of abode — non ded'n

4. Entertainment and Business Mealsa. Moss v. Comm'r (Tax Ct. 1983) (B/288)

(1) partner at law firm req'd to have each lunch with other lawyers (every day), and claimed ded'n(2) H: Ded'n disallowed. Mere fact that this time (during lunch) is given over does not convert the cost of daily meals into a business expense to be shared by the government

b. § 274 (not required to know details)(1) only 50% of costs will be ded'ble(2) compromise(3) problems w/ enforcement

(a) tps have to keep track of this(b) IRS not really capable of enforcing this

i) Revenue agents not lawyersii) overworked, underpaid

(4) has practical effect of making cases like Moss less likely5. Home Office Expenses

a. § 280A(1) only applies if you already have an allowable ded'n (from § 162)(2) § 280A can only take the ded'n away

b. Comm'r v. Soliman (S.Ct. 1992) (B/296)(1) construing "principal place of business"(2) Anesthesiologist with no office provided by hospital wanted to deduct cost of maintaining a spare room in his house as an office(3) H: Principal business of anesthesiologist requires a hospital(4) rejected focal point test(5) 2 primary considerations

(a) relative importance of the activities performed at each business location(b) time spent at each place

(6) R: Where there is no principal place of business, court should not strain to find one

(a) home office does NOT qualify by default


D. Non-Ded'ble Capital Expenditures1. Capitalization

a. only refers to question of whether you can currently deduct the cost of somethingb. § 263 has NOTHING to do with whether or not something capital in nature is a "capital asset" (that term is defined in § 1221)

(1) simply disallows ded'n of capital expendituresc. primary reason categorized as "capital expenditure"

(1) length of time over which it will benefit you(2) cost of asset = expenditure(3) will last you more than one year

d. see B/152 for examples of differences between capitalizing expenses and immediate expensinge. when amount must be capitalized, it is added to tp's basis in the asset with respect to which the expenditure is incurred

(1) amount will either be(a) recovered when asset is sold; OR(b) recovered over some period of time during which the asset is held

i) through a series of depreciation ded'ns -- spreading the cost out over time

2. Acquisition and Disposition of Assetsa. costs of asset, as well as costs of acquiring asset (such as broker's fees) must be capitalizedb. Woodward v. Comm'r (S.Ct. 1970) (B/308)

(1) Majority shareholders had to sue to determine purchase price of minority shs' stock. Claimed legal fees as § 212 expenses(2) H: Costs of negotiating purchase price are costs of acquiring a capital asset. Court's substitution of its finding of price is likewise cost of acquisition(3) STD is based on origin of claim litigated(4) not a but-for test, but this analogy helps

(a) wouldn't spend this money if not trying to acquire the asset

c. costs of constructing property(1) costs of constructing capital asset must be capitalized

(a) in order to provide parity with purchaser of property(2) THUS -- costs that would normally be ded'ble (eg., wages paid to workers) must be capitalized(3) for some expenses, this result flows directly from § 263(a)(1)

3. Non-Recurring Exp and Exp that Provide Benefits beyond current yeara. INDOPCO v. Comm'r (S.Ct. 1992)

(1) I: Whether certain professional expenses incurred by a target corp in course of friendly takeover (merger) are ded'ble under § 162 as ordinary and necessary business expenses


(2) H: No. Target co failed to meet its burden of proof that this deal would not provide benefits beyond the current year for target co.(3) R: TPs realization of benefits beyond year incurred is undeniably important in determining whether appropriate tax treatment is immediate ded'n or capitalization

b. Environmental Remediation Expenses(1) if you own land, contaminate it, and then fix land

(a) can deduct repair costs(2) if you buy contaminated land, and fix it

(a) CANNOT deduct repair costs(b) you are creating something different than what you purchased(c) extending life of asset is not deductible

E. Recovery of Capital Expenses1. Depreciation

a. § 167 — permits as a depreciation ded'n:(1) reasonable allowance for exhaustion, wear & tear (including obsolescence) of assets used in a trade or business or held for the production of income(2) DOES NOT say the property must decline in value

b. § 168 — provides mandatory system of depreciation for tangible personal property and real propertyc. depr'n ded'n designed to allow tps to treat as an expense in determining taxable income am allocable part of the cost of business or investment assets that have a limited lifed. Economic Depr'n

(1) income tax has never been attempted to measure this directly(a) although, would properly measure net income for the period

e. Recovery of Capital(1) methods to determine depreciation allowance

(a) straight-line methodi) cost of an asset is allocated in equal amounts over its useful lifeii) reciprocal of useful life

a) THUS, if useful life = 10 years, then rate of depreciation is 1/10

(b) declining-balance method ("accelerated depreciation")i) allocates a larger portion of cost to earlier years and lesser portion to later yearsii) constant percentage is used, but is applied each year to amount remaining after depreciation of previous years has been subtractediii) double the straight-line rate

(2) current rules(a) MACRS (Modified Accelerated Cost Recovery System)


(b) depreciable assets are assigned to recovery classes (8 — with class lives ranging from 3 to 39 years)(c) straight-line depreciation MUST be used for real property § 168(b)(3)(d) tp may elect straight-line for any class § 168(b)(3)(c) and (b)(5)(e) salvage value not taken into account

(3) Amortization (almost exclusively refers to intangibles)(a) defin: the allocation (and charge to expenses) of the cost or other basis of an intangible asset over its estimated useful life(b) under § 197, most intangibles (including "good will") are amortized on straight-line basis over a 15-year period(c) sacrifices accuracy for simplicity(d) no longer any incentive to distinguish good will from other asset b/c both are amortizable(e) don't need to know this for the exam

(4) Recapture(a) § 1245 (see § 1231 capital gains) and § 1250 (real property) provide that certain amounts previously deducted as depreciation will be "recaptured" as ordinary income (rather than as capital gain) when depreciable property is sold

(5) Land(a) not depreciable(b) buildings, however, are(c) justifications for disallowing depreciation of land

i) does not wear out or become obsoleteii) land has no "ascertainable useful life"

(6) Antiques(a) IRS has taken position that antiques are not depreciable b/c they do not have a determinable useful life defined by the physical condition of the art work(b) BUT, if you use an antique in connection with trade or business (eg. violin player) you have a stronger argument for depreciation

f. recovering capital(1) once determined that item must be capitalized as a separate asset, MUST be added to basis of your original item(2) method of allowing you to recover your cost

F. Interest1. General Structure of the Interest Ded'n

a. ded'bility of interest turns gen'lly on the purpose of the indebtedness(1) question often unanswerable since tps generally borrow to acquire new assets and to keep everything they have

b. should be regarded as a cost of tp holding assets that are used in a business, for investment or for personal consumption


c. Business Interest(1) cost of doing business § 162

(a) interest on indebtedness used to operate a trade or business

(2) b/c all businesses borrow, it's thus ordinary/ necessary (3) ded'ble like any other business expense(4) EXCEPT where interest is required to be capitalized

(a) eg. when allocable to an asset tp is constructing(5) deducted without limit § 163(a)

d. Investment Interest (§ 163(d))(1) see O/18b for more information(2) defin: money borrowed to purchase securities or real estate held as an investment(3) shall not exceed net investment income

(a) example of basketting (where balance losses against gains)

e. Personal Interest(1) under § 163(h) personal, non-business interest generally is not deductible(2) defined by omission to include an interest otherwise ded'ble under § 163 that is NOT:

(a) paid or incurred in connection with a trade/business(b) investment interest(c) ded'ble in connection with a § 469 passive activity(d) "qualified residence interest" § 163(h)(3)(e) interest on certain deferred estate tax payments

f. Home Mortgage Interest(1) legislative history: "encouraging home ownership is an important policy goal"

(2) two categories(a) acquisition indebtedness(b) home equity indebtedness

(3) total of both cannot exceed $1 million(4) in both cases, the debt MUST be secured by the residence in order to qualify

2. What is Interesta. West v. Comm'r (Tax Ct. 1991) (B/360)

(1) penalty on delinquent mortgage payments claimed as § 163(a) interest ded'n. IRS disallowed(2) H: Not ded'ble b/c bank assessed late charge to recoup its costs related to collection of delinquency fees

b. defining interest(1) general reluctance of court to characterize payments as "interest" when not specifically labelled "interest"


G. Losses1. In General

a. § 165 permits ded'ns for certain losses not compensated by insuranceb. specific limitations on ded'ns for losses:

(1) losses that might be considered personal(2) losses related to unrealized gains(3) tax shelter losses

(a) intended primarily to preclude tps from using losses derived from tax shelter investments to reduce earned income (taxes)

(4) limitations for gambling losses § 165(d)(5) for so-called hobby losses § 183(6) ded'bility of casualty losses

c. When do losses occur(1) not when/as they accrue(2) realization is required

d. amount of loss ded'n(1) § 165(b) -- shall be the adjusted basis of property

e. statute uses "loss" two very different ways(1) 165 sense

(a) buy property at $1000, sell it at $750, suffer ($250) loss (b/c actually lost money)(b) can be carried forward/backward under § 172

i) as a net operating loss (assuming you can meet the definition)

(2) "activity"(a) overall set of transactions(b) where activity resulted in a loss, or excess of ded'ns over income for that activity

f. personal losses are NOT ded'ble(1) § 165 (corresponds to § 262 -- disallowing ded'ns for personal expenses)(2) garage sale(3) sell car at a loss (= personal consumption)(4) gambling (§ 165(d))

(a) losses only ded'ble to the extent of income(b) problem of proof

(5) hobby losses(a) § 183(b)(2)

i) requires profit motiveii) provides ceiling for deduction

(b) § 183(d) — presumption that engaged in for profit if rec'd profits for 3 of previous 5 years

i) burden shifts to Comm'r to prove lack of profitii) if tp fails to meet presumption, can still prove profit motive by using requirements listed in Plunkett


(c) Plunkett v. Comm'r (Tax Ct. 1984) (B/376)i) mud racing/truck pullingii) H: found "for profit" in truck pulling activitiesiii) factors to be considered to find "for profit" Reg. § 1-183-2(b)

a) manner in which tp engages in activityb) expertise of tp or his advisorsc) time and effort expended by tp in carrying on the activityd) expectation that the assets used in the activity may appreciate in valuee) success of tp in carrying on similar or dissimilar activitiesf) tp's history of income or loss with this activityg) financial status of tph) whether elements of personal pleasure or recreation are involvedi) NOT ALL FACTORS have to be satisfied — just considered

iv) fact specific inquiry2. Tax Shelter Losses

a. "At-Risk" limitation of § 465(1) by using non-recourse debt, a tax shelter investment may produce tax losses for tps who invest little of their own money in an asset and bear little economic risk of loss(2) § 465 severely curtailed opportunities to gain tax losses through non-recourse financing

(a) allows tps to deduct losses on an investment only in the amount that he is "at risk" w/ respect to that investment(b) tp only considered "at risk" to extent of

i) his investment of cash in the activity;ii) the adjusted basis of property contributed;iii) the debt on which he is personally liable for repayment; ANDiv) NET fmv of his personal assets that secure non-recourse borrowings (apart from the investment)

b. "Passive Loss" limitation of § 469(1) introduction

(a) § 469 — extremely broad-based attack to limit ded'n of losses from passive activities(b) intended primarily to preclude tps from using losses derived from tax shelter investments to reduce taxes on earned income and on investment income like interest and dividends


(2) mechanics(a) aggregate ded'ns here can only offset aggregate income from here (balance -- basketting)(b) losses in excess cannot be ded'd, but can be carried over to offset passive activity income of subsequent years (§ 469(b))

(3) includes(a) the conduct of a trade or business in which tp does not materially participate; AND(b) rental activities

i) per se passiveii) even if tp participates materially in management (§ 469(c)(2))

(4) seven alternative tests — for determining whether "material participation" exists: (found if any one is true)

(a) tp spends more than 500 hours/taxable year on activity;(b) tp performs substantially all of activities performed by all of individuals involved in the activity for a taxable year;(c) tp spends over 100 hours/ year when that equals or exceeds participation of any other individual;(d) tp has significant participation (over 100 hours) and her combined participation in all such activities exceeds 500 hours(e) materially participates in activity for any 5 of last 10 prior taxable years(f) materially participates in a "personal service activity" in any one of the 3 prior taxable years; OR(g) tp can show material participation by proving facts & circumstances that demonstrate that tp participated in the activity on a regular, continuous and substantial basis

i) Regs § 1-469-5T(5) work typically performed by investors doesn't count (like reviewing financial statements only)(6) limited partner never treated as "materially participating" unless can prove over 500 hours/taxable year, meets 5-yr or 3-yr test, or is also general partner(7) also — new concept of significant participating activities to identify situations where tp will not have passive income

(a) purpose: to ensure that it will not be easy for a tp to create passive income(b) losses from that activity will still be passive losses(c) criticized b/c "heads we win, tails you lose" (as tp = you)

H. Bad Debts (N/45)1. U.S. v. Generis (S.Ct. 1972) (B/422)

a. tp made a bad debt both to protect his job and his investment


b. H: proper standard is "dominant motivation". Tp's argument was not only irrelevant, but unconvincingc. R: shareholder's mere activity in a corporation's affairs is not a trade or business

2. Code Requirementsa. bad business debts --> ded'ble in full as ordinary lossb. partially worthless bad debt --> ded'ble to extent charged off on books § 166(a)c. § 165 and § 166 mutually exclusive

3. For cases finding dominant motivation, see O/26bI. Personal Ded'ns (N/45)

1. Standard Ded'nsa. flat amount that varies with marital status and may be taken regardless of whether the tp actually had expendituresb. effectively provides a floor for itemized ded'ns b/c it can be taken in lieu of itemized ded'nsc. indexed annually for inflationd. additional allowances

(1) persons over 65 (married $950 each — single $950 each)(2) blind (same amounts for 65 and over)(3) married max = $3,000; unmarried max = $1,900(4) NOT available to those who itemize

e. filing status(1) married, filing jointly (more favorable than #2)(2) married filing separately(3) surviving spouse § 2a

(a) tp must remain in household with dependent children or grandchild for entire tax year

(4) head of household § 2b(5) single

f. marital status(1) determined at year end(2) tp whose spouse dies mid year = married for full year(3) tp who divorces mid year = unmarried for full year(4) married individuals living apart (for last 6 months)

(a) one who supports dependent child = unmarried(b) one who does not live with child = married

2. Personal Exemption a. $2500 — § 151b. indexed annually for inflationc. joint return § 151(d)

(1) at $172,050 taxable income, exemption is reduced(2) at $294,550 taxable income, exemption disappears

d. entitled to exemption for each dependent


3. Earned Income Tax Credita. § 32 — to low income individuals

b. refundable --> so that even those with no tax liability can get it(1) file tax return simply to get cash payment

c. max for tps w/2 or more children = $3110d. amount increases in 1995, and is indexed against inflatione. originally enacted to reduce burden of social security payments on the poorf. tp can receive payment through a reduction in his withholdings

4. Credit for Elderly and Disableda. see § 22

J. Personal Itemized Ded'ns (N/45b)1. those that don't depend on a trade or business2. Taxes

a. § 164 — allows ded'n for certain state and local taxes, taxes to foreign countries, and to federal government

(1) constitutes an exception to § 262 (that no ded'ns are allowed for personal, living or family expenses)

b. only available to those who itemizec. ded'n for income and property taxes is not subject to the 2% floord. some taxes cannot be ded'd regardless of personal v. profit-seeking business

(1) federal income tax — § 275(2) employee Social Security Tax(3) estate, gift, and inheritance taxes by federal, state or local

e. if quid pro quo (if you're getting something (services) for your "tax" payments) — it's no tax f. capitalization requirement

(1) § 164(a)(2) does NOT apply to

(a) state, local, or foreign real property taxes(b) state or local personal property taxes(c) state, local, or foreign income taxes(d) environmental tax

(3) § 263A requires capitalization of costs in connection with construction

3. Policies re: ded'bility of taxesa. 2 principal justifications

(1) ded'n produces a more accurate measurement of taxable income(a) b/c state and local tax payments are compelled rather than voluntary

(2) state and local income taxes are direct cost of earning income that will be taxed at federal level

(a) should thus be ded'ble b/c fed income tax is imposed only on net income


4. Charitable Contributionsa. § 170 — provides the ded'n

(1) ded'n generally permitted for a transfer of cash or (in some cases) for fmv of property transferred(2) not allowed for contribution of services

b. limitations(1) ded'n can be no more than 50% of AGI § 170(b)(2) certain gifts of appreciated property are limited to 30% of tp's AGI(3) not subject to 2% floor(4) BUT subject to cap on itemized ded'ns under § 68(5) corp's charitable ded'n is limited to 10% of taxable income(6) neither individual's nor corps can deduct charitable contribution in excess of percentage limits(7) §170(f)(8) substantiation requirement

(a) huge burden on charitiesc. why allow ded'n

(1) some argue that char. contribs are a choice, thus are personal consumption

d. when is a transfer to a charity a contribution (1) Hernandez v. Comm'r (S.Ct. 1989) (B/439)

(a) defines what is a charitable contribution(b) Scientologists — fees to participate in services(c) H: These payments were part of a quintessential quid pro quo exchange: in return for their money, tps rec'd an identifiable benefit, namely, auditing and training sessions(d) R: Congress intended to differentiate between unrequited payments to qualifying recipients (ded'ble) and payments made to such recipients in exchange for goods and services (non ded'ble)(e) IRS w/drew its ruling that applied to these specific facts

i) see N/47 for more details(2) Detached and Disinterested Generosity

(a) Courts have increasingly supported the notion that a ded'ble charitable contribution must meet Duberstein test for what is a gift

e. gifts of appreciated property(1) tp who gives appreciated property to a charity DOES NOT realize a gain(2) BUT -- Code allows tp to deduct fmv

(a) thus, gain remains untaxed(3) tp will also not realize a loss

(a) unless sells it first to realize a loss for taxes(b) contributes the proceeds

(4) benefit limited by § 170(e)(a) source of controversy


(b) amount of ded'n depends on whether donee is a private foundation or public charity, AND(c) whether appreciation would be taxed as a capital gain or ordinary income if sold, AND(d) whether gift is tangible property or securities(e) gift of property (not securities) to private foundation — deduction is generally limited to basis(f) see § 451 for examples

(5) valuation(a) value must be measured with reasonable accuracy(b) fm price defined by what would be paid by ultimate consumer — NOT by a dealer wanting to resell

5. Overall Limitation on Itemized Ded'nsa. § 68 (new with 1986 Act)b. applies AFTER you've taken other limitations (eg. 2% floor)c. phases out deductions over $100,000 of AGI

(1) broadens the tax base at the highest levelsd. through the back door

III. Whose Income Is ItA. The Taxable Unit

1. Optionsa. individuals w/o regard to marital statusb. family unit, taxed on its aggregate incomec. income of married couples aggregatedd. "economic unit," such as a householde. As long as there is a progressive tax structure, the distinction matters

2. Taxation of the Familya. Marriage Penalty

(1) § 68(b) singles >> each $100,000marrieds >> each $50,000

(2) rate structure (see Druker)b. Druker v. Comm'r (2d Cir. 1982) (B/467)

(1) married couple file separately, applying rates of single individuals to challenge the "marriage penalty"(2) I: is the penalty on marriage unconstitutional(3) H: No. Reasonable regulations that do no significantly interfere with decisions to enter into marital relationship may be legitimately imposed

3. Dissolution of the Family — Separation and Divorcea. Revenue Ruling following Druker 76-255

(1) deals with Dominican Republic divorces on Dec 31st(2) sham divorces(3) IRS will not recognize them for tax purposes


(4) requires "decrees of divorce" § 7703(a) where state court has declared divorce invalid, IRS will usually follow this declaration for federal tax purposes

(5) innocent spouse(a) § 66 relieves innocent spouse from tax on community property rec'd but not shared by other spouse(b) does not apply on a joint return

b. Alimony & Support Payments (B/480)(examples B/482 & N/51)(1) § 215 -- defines alimony(2) § 71 (treatment of alimony & support payments) provides:

(a) taxation of recipient, AND(b) ded'n for payor(c) limitations -- ded'ns allowed so long as

i) payments are in cash rather than property or services

a) property settlements not ded'bleii) the parties do no earmark payments as non-deductible to the payor and nontaxable to payee

a) allows parties to contract out of alimony tax treatment if they want (non-ded'ble, but non'taxable)

iii) the parties do not live in the same household if they are already legally divorced or separatediv) there is no liability for any payment after the death of the payee

a) which begins to look like child support disguised as alimony

v) the payments do not constitute child support(3) above the line ded'n (see § 62(a)(10))(4) front-loading alimony prohibited

(a) prevents substituting property settlements (non-ded'ble) for alimony (ded'ble)

c. Property Settlements (§ 1041) (B/483)(N/50b)(1) Code provides for non-recognition of realization event at settlement(2) transferor does not have to pay tax on appreciation

(3) BUT, transferee gets lower basis (carryover basis)(a) which means, transferee would have to pay tax on appreciation upon a sale of the property

(4) unlike gift basis rule of § 1015, one spouse can transfer a loss to another spouse


d. Differentiating between two (N/51)(1) § 71(f) requires review of the divorce settlement 3 years later

(a) if payments are front-loaded, then will make payor and payee recapture amounts in year 3

i) this may actually be beneficial depending on the tax brackets & burdens for each in year 3

(2) payments rec'd under a temporary support order can be considered alimony under § 71(f)

(a) § 71(b)(2)(C) -- alimony definition requires divorce/separation "instrument"

B. Assignments of Income1. Problem only under a progressive rate structure2. TPs want to take income taxed at a high rate and place it in the pocket of person with no income at all3. Income from Services

a. Lucas v. Earl (S.Ct. 1930) (B/487)(N/52b)(1) husb & wife contracted that as soon as husb was paid, wife owned 1/2 of earnings. Claimed that husb could only be taxed on half of his salary

(a) since contracted in 1901 (before tax), following their move from a community property state, they were attempting to contract for community property

i) NOT tax avoidance(2) H: b/c husb was the only party to the contracts creating the earnings, and he was the only one who could complete them, he should be taxed at full rate(3) FIRST annunciation of assignment of income doctrine

b. 1948, Congress allowed married taxpayers to file jointly(1) addressing the issue of violation of horizontal equity

c. § 1 -- kiddie tax(1) prevents parents from assigning income to kids under 14 years old

d. Revenue Ruling 74-581 (B/496)(1) deals with law school faculty or students performing services under a clinical program(2) income derived from such activities is contracted to be income to the school(3) THUS, IRS agrees that neither faculty member nor student has earned taxable income from that endeavor

4. Income From Propertya. Blair v. Comm'r (S.Ct. 1937) (B/500)

(1) father willed to son certain property rights. Son, in turn, assigned them to his children(2) H: his children were then the beneficial owners of the property, and Son did not have any control over them. Son has no income from this.


b. Helvering v. Horst (S.Ct. 1940) (B/502)(1) father transferred right to receive interest to son. retained right to receive his initial investment (principal)(2) H: father attempted to assign "fruits" rather than whole tree. Entire amount is taxable to father

5. Is income from property or services?a. Heim v. Fitzpatrick (2d Cir. 1959) (B/511)

(1) Tp transferred certain rights related to a patent to his family members(2) H: the rights assigned were sufficiently "income producing property" to constitute taxable income to donees (the family)

6. Assignment of income works when?a. when assign the whole tree (the asset), not just the fruit (interest income from the asset)

IV. Capital Gains and LossesA. Introduction

1. no such thing as a separate capital gains taxa. § 1 imposes The Tax (one tax)

(1) § 1h — simply a limitation on rate (2) if marginal rate = 15%, capital gains treatment is irrelevant

(a) will be taxed only at the 15% rate anywayb. "net capital gain" (N/54b)

(1) gain from sale/exchange of capital asset(a) § 1221 defines capital asset(b) § 1222 definitional section

i) § 1222(11) defines net capital gain(c) long term (§ 1221(7)) requires holding period > 1 year(d) short term -- holding period less than one year(e) RESULT: only long-term capital gains can EVER make it into definition of net capital gains

B. Mechanics of Treatment of Capital Gains & Losses1. Issues to address in any question involving capital gains:

a. definition of capital gain — § 1221 and some judicial opinions(1) requires: gain from sale or exchange of capital asset held for over one year

b. sale or exchange(1) lottery does not count(2) also comes up when people seek to abandon property(3) won't be capital unless sell or exchange

c. greater than one year ("holding period" requirement)(1) § 1223(2) generally, whenever there is a carryover of basis (§ 1015 -- or § 1041-dissolution of a marriage) there will also be a carryover of holding period


(3) Regs have wonderful detail about how to compute this(4) not responsible for any of these details on the exam

2. Capital Lossesa. § 165(f) deals with capital losses

(1) says to go to § 1211(a) if losses exceed gains get less of excess OR $3,000(b) ceiling = $3,000

(2) or to § 1212(a) not responsible for the mechanics of it(b) BUT, it allows carry-back or carry-forward of losses

b. Corps enjoy no preference for capital gains(1) BUT, can't take capital losses at all without offsetting them against capital gains

c. Why worry about them(1) concerned with symmetry between treatment of losses and gains

(a) capital gains taxed at 28%(b) BUT, ordinary losses deductible (hypothetically) at 40%

(2) realization requirement(a) allows taxpayer to choose when to take their loss deductions

d. THUS, limited deductibility of capital losses(1) in definition of capital gain & net long-term capital gain

(a) § 1222 requires netting of gains against losses(b) as long as gains net out losses, don't have to worry about losses(c) BUT, if only have net long-term capital loss:

i) loss is treated as ordinary — § 1231(a)C. Various Policies of Preferential Treatment of Capital Gains

1. Some of what looks like gain is really inflationa. key cap gains formula does not take inflation into account

2. bunching: graduated rate structure and realization-based tax systema. if at 15% rate normally, an unusual gain could immediately put you in the 40% rateb. looks at you over a long-term -- see if you are really a 15% taxpayer, or really a 40% taxpayerc. gains were just bunched in one taxable year

3. realization-based system allows the taxpayer to choose the timing of the gaina. having a 40% rate alone would encourage a lock-in-effect (no one would sell -- ever)

4. capital gains aren't income at all a. extreme opinion -- Spector is hereb. merely reflect a rise in interest ratesc. rejects Glenshaw Glass definition

5. Related argument -- in re corporate stocka. would result in taxing income twiceb. see N/55b for more details on this argument


D. What is a Capital Asset1. Statutory Framework

a. § 1221 -- doesn't have to be business related(1) excludes 5 things

(a) THUS, it is a broad definition with narrow exclusions(b) inventory -- (stock in trade)

i) which creates garden-variety business incomeii) Malat is an illustration of this exception

(c) depreciable propertyi) cannot EVER be a capital assetii) see § 1231iii) benefits owners of machinery (assuming that the sales of such machinery will be at a loss)

a) problem happens when it's sold as a gainb. § 1231 — taxpayer wins either way

(1) overall gain = gain/loss are capital(2) overall loss = gain/loss are ordinary(3) simply provides the character for those amounts

(a) no info about applicable tax rate(b) no info on limitations(c) no netting here

(4) § 1231(c) denies you the benefit of cherry-picking(a) not required to know the mechanics(b) seen as an antidote to separating out taxable years

i) see N/59ii) see also Tax Benefit Rule (below)

c. § 1245 — recapture for depreciable property (machines)(1) British call it the "Claw Back"(2) tells you that you have to take the amount deducted (for depreciation) as an ordinary ded'n BACK into income at the full marginal rate (not capital gains rate)(3) does NOT require you to take it at your marginal rate when you deducted it (if you have changed tax brackets since then)

(a) no attempt to fix it exactlyd. § 1250 -- Recapture for real property used in a trade or business

(1) will be less, but didn't go into the detailse. Property Held for Sale to Customer

(1) Malat v. Riddell (S.Ct. 1966) (B/579)(a) Tp involved in land investment -- sold off portions of it (which he claimed as ordinary income). Later decided the investment was a bad idea and sold his interest in it, claiming capital gains.(b) I: how should "primarily" be defined

i) IRS wanted it to be "substantial" motivation(c) H: It means "of first importance" or "principally" This requires a fact-specific analysis.


(2) Byram v. U.S. (5th Cir. 1983) (B/584)(a) TP sold 22 properties over 3 years — at the buyer's request. Wanted to include proceeds as capital gains(b) I: What constitutes "sufficiently frequent"(c) H: There sales were not sufficiently frequent.

f. Depr'ble Personal Prop. and Real Prop. used in trade/business (§ 1231)(1) Int'l Shoe Machine Corp v. U.S. (1st Cir. 1974) (B/580)

(a) tp involved in renting shoe machines. Eventually had to sell machines to lessees(b) I: Whether income from the sales of these machines should have been ordinary income(c) H: Yes. The sale of such machinery, for a price which included the present value of that future ordinary income, cannot be considered the liquidation of an investment outside the scope of ordinary course of business(d) R: final liquidation of inventory, although accepted and predictable, wld normally be eligible for cap gains treatment

2. Judicial Gloss on the Statute: Common Law on Capital Gainsa. Corn Products Refining Co. v. Comm'r (S.Ct. 1955) (B/599)

(1) "Corn Products" Doctrine(2) Corn refining co purchased/ sold corn futures as a method of keeping its manufacturing prices down. Claimed as ordinary income/loss on taxes, but later wanted it treated as cap gains/losses(3) I: whether the futures were "property" entitled to capital asset treatment under § 117 [now § 1221](4) H: No. To hold otherwise would be to allow those engaged in hedging transactions to change ordinary income into capital gains at will(5) IRONY: This case was invoked repeatedly to treat losses as ordinary, but seldom to treat gains as ordinary income!

b. Arkansas Best Corp. v. Comm'r (S.Ct. 1988) (B/602)(1) PUT CLAMP ON CORN PRODUCTS DOCTRINE

(a) restricted it to the inventory exception(2) Corp bought stock in Bank in order to give Bank added capital. When sold, suffered a loss -- claimed ordinary loss deduction(3) I: Whether capital stock held by corp is "capital asset" under § 1221 regardless of whether stock was held for a business or investment purpose(4) H: Yes. B/c capital stock held by corp falls within broad definition of term "capital asset" in § 1221 and is outside the classes excluded, the loss arising from the sale is a capital loss(5) Result: personal house is a capital asset b/c it is not among the exceptions

(a) BUT -- cannot get capital loss treatment for it(b) see N/61b for more information


V. When is it Income? or Deduction? (Accounting Problems)A. The Taxable Year

1. In Generala. the "tax benefit" doctrine

(1) if something happens that is fundamentally inconsistent with something else that happened, the court will intervene to make them consistent

(a) eg. take deduction for state taxes in Year 1(b) in Year 2, state refunds the amount

i) tax benefit doctrine will require you to take that amount into income

(2) Hillsboro Nat'l Bank v. Comm'r (S.Ct. 1983) (B/694)(a) I: Whether deductions in these cases were inconsistent with later events, and whether tax benefit rule applies(b) H: in Hillsboro (state tax refunded directly to shs), since corp did not refund the money (thus negating the deduction), it's consistent

i) BUT, in Bliss, tp converted the expensed/ deducted asset into some other non-business use thereby negating the deduction. Tp required to recover that deduction in income

B. Methods of Accounting1. § 446 -- contains the accounting rules2. § 451 -- defines the year in which to take this deduction3. The Cash Method

a. defin: requires physical receipt of income and physical payment of expenses

(1) the default method for most taxpayersb. "Constructive Receipt" Doctrine

(1) Applies when money was actually available to the taxpayer(a) prevents tp from waiting till Jan 3 to receive December paycheck

(2) Carter v. Comm'r (Tax Ct. 1980) (B/716)(a) In 1974, TP was city employee whose paycheck was delayed 4 weeks until Jan. 1975. Tried repeatedly with no success to get the money sooner. Tried to claim income in 1974 (when had been unemployed, thus had no tax liability).(b) H: There was no constructive receipt in 1974 because tp did not have free and unrestricted control of his wages prior to actual receipt

4. The Accrual Methoda. defin: depends on the accrual of the rights to receive the income and the accrual of the duty to payb. businesses that maintain inventories are required to use the accrual method


c. can't get deduction without "economic performance:(1) until you get what you paid for (b/c it's when you are most likely to pay for the goods/service)

VI. Statutory SummaryA. Regulations

1. § 7805 (for enforcement)...........................................................Interpretive Regsa. to invalidate (very difficult) have to show

(1) not "necessary" for enforcement(2) goes beyond interpretation

2. § 132(m) (to carry out the purposes)...........................................Legislative Regsa. carry same weight as legislationb. to invalidate (even more difficult) have to show

(1) Reg goes beyond statute; AND(2) goes beyond PURPOSE of statute


Table of Contents

Income 1What is income.................................................................................................... 1Compensation for Services (§61)......................................................................... 1

Fringe Benefits........................................................................................ 3Meals & Lodging..................................................................................... 4Interest-Free Loans.................................................................................. 5

Imputed Income.................................................................................................. 5Gifts & Bequests................................................................................................. 5Capital Appreciation and Recovery of Basis......................................................... 6

Determining the Basis of Property............................................................ 6Adjusted Basis......................................................................................... 7Allocation of Basis................................................................................... 7

The Realization Requirement............................................................................... 7Windfalls ................................................................................................ 8

Annuities and Life Insurance (only generally)...................................................... 9Borrowed Funds.................................................................................................. 9

Loans and Discharge of Indebtedness Income........................................... 9Effect of Debt on Basis and Amount Realized..................................................... 10Illegal Income..................................................................................................... 10Damages............................................................................................................ 11

Deductions and Credits................................................................................................... 13Introduction........................................................................................................ 13Business Expenses (Deductible -- Ded'ble).......................................................... 14

Expenses Contrary to Public Policy......................................................... 15Employee Business Expenses.................................................................. 15

Non-Ded'ble Personal Living or Family Expenses............................................... 16Travel Away from Home........................................................................ 17

Transportation Expenses.............................................................. 17Food and Lodging....................................................................... 17

Entertainment and Business Meals........................................................... 18Home Office Expenses............................................................................ 18

Non-Ded'ble Capital Expenditures....................................................................... 19Capitalization.......................................................................................... 19Acquisition and Disposition of Assets...................................................... 19Non-Recurring Exp................................................................................. 20

Recovery of Capital Expenses............................................................................. 20Depreciation........................................................................................... 20

Interest 22


Business Interest..................................................................................... 22Investment Interest (§ 163(d)).................................................................. 22Personal Interest...................................................................................... 23Home Mortgage Interest.......................................................................... 23

Losses 23Tax Shelter Losses.................................................................................. 25

Bad Debts........................................................................................................... 26Personal Ded'ns.................................................................................................. 27

Standard Ded'ns...................................................................................... 27Personal Exemption................................................................................ 27Earned Income Tax Credit....................................................................... 28Credit for Elderly and Disabled............................................................... 28

Personal Itemized Ded'ns.................................................................................... 28Taxes 28Policies re: ded'bility of taxes.................................................................. 28Charitable Contributions.......................................................................... 29Overall Limitation on Itemized Ded'ns..................................................... 30

Whose Income Is It........................................................................................................ 30The Taxable Unit................................................................................................ 30

Options................................................................................................... 30Taxation of the Family............................................................................ 30Dissolution of the Family — Separation and Divorce............................... 31

Assignments of Income....................................................................................... 32

Capital Gains and Losses................................................................................................ 33Mechanics of Treatment of Capital Gains & Losses............................................. 34

Capital Losses......................................................................................... 34Various Policies of Preferential Treatment of Capital Gains................................. 35What is a Capital Asset....................................................................................... 35

Judicial Gloss on the Statute: Common Law on Capital Gains.................. 37

When is it Income? or Deduction? (Accounting Problems).............................................. 37The Taxable Year............................................................................................... 37

the "tax benefit" doctrine......................................................................... 37Methods of Accounting....................................................................................... 38

The Cash Method.................................................................................... 38"Constructive Receipt" Doctrine................................................... 38

The Accrual Method............................................................................... 38

Statutory Summary......................................................................................................... 38


Sample Analysis for Previous Exam Questions

Q1 Part I(Dec 1994)

Captain Glasseye

$20,000 to put the mutiny down DED'BLE: § 165 losses in a trade or business

$ 5,000 new fiberglass plank(pvs was getting badly weathered)

Not ded'ble. Required to be capitalized (it was replaced, and added to the value of the asset which will last beyond the current year). § 263

$ 5,000 repairs from damage DED'BLE: § 162 (see reg 162-4)

Repairs to the property simply maintaining its value

$ 5,000 barnacles removed; will run like the wind for about 2 years

Not ded'ble in current year -- required to be capitalized (benefits beyond the current year) § 263A

$ 5,000 rewards to loyal buccaneers DED'BLE: § 162 costs related to trade or business (bonuses) (see Reg 162-9)

$ 2,000 to recuperate High personal expense content. Would NOT be ded'ble business expenses (not intended to raise revenue, even, so it's not a mixed motive activity)

State income tax amounts State income taxes are ded'ble under § 164

Assumption: that the state income taxes that his personal taxes of his business profits

Loyal Buccaneers

Under Glenshaw Glass, the $5,000 paid to loyal buccaneers is completely taxable to them as additional compensation by their employer. Bonuses are counted as ordinary income.


Q1 Part II (Dec 1994)

Seamus

Room & board on ship* NOT taxable if primarily for the convenience of the employer (Gotcher)* this was not a cash payout, just provision of services on HIS boat* NOT INCOME

Gold pieces for crust & rum * Kowalski * § 119 applies only to meals furnished NOT to cash reimbursements for meals* INCOME, no ded'n (because feeding oneself is inherently personal)

Shiny gold scarves * Working condition fringe § 132 (not taxable)not suitable for ordinary wear; have the captain's initials, severe punishment if don't wear

* distinguishable from Pevsner b/c here gives them the scarves (does not require that they go out and buy them) (Also, Seamus is not attempting to simply get a ded'n -- wants to know if this is income)

although, if income, perhaps there would be a ded'n because clothing only ded'ble if: (a) of a type specifically req'd as a condition of employment; (b) not adaptable to gen'l usage as ordinary clothing; and (c) it is not worn off the job

* WHAT ABOUT THE RUBIES? If they're separable, they might be income (like the diamond ring in the piano). From a practical standpoint, though, if he's required to wear the scarf as is, he probably could not get away with removing the rubies.* also, I'm making an assumption that if he quits, the scarf stays with the Captain

Weekly meal § 119 -- not income because it's provided by the employer in his quarters

Necklace ($10,000) Glenshaw Glass income. Illegal income, but income all the same. Indirectly a result of compensation -- if he weren't a top pirate, he wouldn't be getting part of the plunder.

3 gold coins Old Colony. Considered additional income to Seamus. It's the same as if he Captain paid him an additional 3 coins, which he was able to send to his mum.


Q1 Part III (Dec 1994)

Liquidated damages (all plunder from next 6 outings)-- NOT excludable from income-- compensates Seamus for his injury (punitive damages are always includable in income. back pay would have been taxable at time of receipt just like other income)


Q2 (Dec 1994)

Pete is in 39.6% tax bracket

$10,000,000 services straight compensation. taxable as ordinary income § 61

no charge for Hotel

which he endorses ordinary income, taxable as compensation

P's mother at hotel free

which he mentions in the promotions ordinary income (like Old Colony -- if he were to give her the money to stay there. Just so happens that they're giving her the ability to stay there)

$10,400 to stylist paid by company ordinary income -- like Old Colony

$5 mil debt forgiveness at casino like Zarin. Because the debt is unenforceable, there is no income from the debt forgiveness

$3 million winnings & losses counterbalanced losses can offset the winnings

$500 k for lawyer; casino suing to get paid the remainder of the debt

claim is personal, thus legal fees are not ded'ble as a maintainance of trade or business

$500 K to casino; liquidated damages not ded'ble

$1 million gain on stock at sale capital gains treatment. Can be taxed at 28% rate

$500K "alimony" to wife for two years only frontloaded. looks like a property settlement. Not ded'ble

stock transfer as part of divorce settlement she gets his basis of $10k (thus, when she sells, she pays the tax on appreciation). He does not have to pay tax on the appreciation because there's a non-recognition of realization

$50K DUI representation ALL THREE: Gilmore. Origin


$10K$100K

fineMADD Contribution

of the claim is personal, thus legal fees, etc, are not ded'ble

$100K loss on sale of car non-ded'ble as personal loss


FEDERAL INCOME TAX — FLAT-TAX PROPOSALSProfessor Abreu/ Graetz & Schenk 3d Ed

Key: N/# -- page in notes

VII. Fringe benefits (§ 132) (N/16)A. ISSUE DOES NOT GO AWAY B. Hall/Rabushka (economists)

1. no longer a ded'n for FBs -- but not included in income unless in cash2. cash-only definition of income

C. Armey (HR 2060)1. same kind of § 132 inquiry2. do not define fringe benefits

D. Archer (HR 56)1. deals exclusively with capital gains2. affects § 132(c)(4) only

E. Specter (S 488)1. relies heavily on current laws2. definition of income still from current code

F. Nunn/Domenci (S 722) USA Tax1. takes § 132 almost word-for-word2. added a section for employee training

VIII. Gifts & Treasure Trove (N/21b)A. Hall/Rabushka (economists)

1. don't address gifts or basisB. Armey (HR 2060)

1. no definition of business2. repeals entire chapter (including § 102)3. no mention of basis

C. Archer (HR 56)1. adds a provision changing the calculation of basis

a. intended to take inflation into account 2. doesn't deal with cash3. seems more complicated

a. more numbers to crunchD. Specter (S 488)

1. taxable income base = is only earned income2. never defines basis

E. Nunn/Domenci (S 722)1. makes same distinction as with § 1014 & 10152. exclusion for gifts like § 102


IX. Discharge of Indebtedness, Damages, Illegal Income (N/33b)A. Hall/Rabushka (economists)

1. more concerned with underreporting of LEGAL income2. doi: differentiates between wages and bonuses

a. only dealt with in terms of employee-employer relationshipB. Armey (HR 2060)

1. doesn't change much2. base = business taxable inc. (gross active income - ded'ns specified in sub§ D)3. same pattern as in current code

C. Archer (HR 56)1. only deals with capital gains

D. Specter (S 488)1. flat tax on "earned income"2. issue would still remain for illegal income3. damages -- punitives would probably not be "earned"4. discharge of indebtedness -- same Old Colony argument

E. Nunn/Domenci (S 722)1. taken the most seriously2. excludes drug dealer's income

X. Personal and Business Deductions (N/53b)A. Hall/Rabushka (economists)

1. "personal allowance" -- same as personal exemption (above the line)2. no ded'ns allowed for individuals3. separate scheme for business income

a. individuals can be engaged in businessb. fails to address whether individuals can be considered in business of being an employee

(1) could individual be taxed as both?)4. for individuals, though, this is clearly simplification

B. Armey (HR 2060)1. std ded'n

a. single x2 = marriage ded'nb. gets rid, partially at least, of the marriage penalty

2. personal ded'ns simplifieda. no mortgage interest ded'ns

3. business income is same as it is nowC. Archer (HR 56)

1. deals only with capital gains


D. Specter (S 488) (campaign has now been suspended)1. only three categories of personal ded'ns

a. standard -- substantially increasedb. charitable

(1) of cash or its equivalent (credit cards)(2) eliminates valuation problem

c. home mortgage interest(1) only for acquisition interest(2) NOT 2d mortgages(3) limit on top dollar value of home

2. no itemized ded'ns3. business ded'ns

a. follows Hall/Rabushkab. presents same issue of employee in trade or business of being an employee perhaps being taxed twice

E. Nunn/Domenci (S 722)1. allow a deduction for savings

a. USA bill = unlimited savings accountsb. thus, akin to a consumption tax

2. still have marriage penalty3. alimony & child support not distinguished

a. now a deduction for both

XI. Capital Gains (N/61b)A. Hall/Rabushka (economists)

1. no special treatment of capital gainsB. Armey (HR 2060)

1. no special treatment for capital gains C. Archer (HR 56)

1. gets rid of § 1(h)2. gives ded'n of 50% of capital gains

a. decreases tax baseb. returns to pre-1986 treatment of cap gains

(1) see N/56b for more detailsc. above the line ded'n (everyone gets it)d. allows capital loss ded'n for personal residence loss

(1) car loss still not allowed under § 165(c)3. no simplification

a. BUT more specific about what is included in certain definitions4. purports to AMEND the current code


D. Specter (S 488) (campaign has now been suspended)1. doesn't address cap gains at all

a. among the group that believes that cap gains just aren't income2. base = earned income3. purports to REPLACE the current code4. taxable unit = individual

a. can file jointly, but better treatment if file separately(1) married, filing separately = $9500(2) married, filing jointly = approx $ 16,000

E. Nunn/Domenci (S 722)1. didn't really discuss in the context of capital gains2. just to indicate that it primarily was a consumption tax


Loyola University New Orleansebls/Outlines Q-T/taxlawfedincom… · Web viewP's mother at hotel...

Documents

Transcript of Loyola University New Orleansebls/Outlines Q-T/taxlawfedincom… · Web viewP's mother at hotel...