Calvin Johnson

Fixing the Constitutional Absurdity of the Apportionment of Direct Tax argues that the Constitutional requirement that “direct tax” be apportioned among the states according to population should never be used to make any federal tax impossible. “Direct tax” is a word like “trash” defined by what you are going to ...

Under current law, a taxpayer may deduct the costs of development of computer software as soon as the costs are paid or accrued. The immediate deduction of investment costs that have continuing value means that tax does not reduce the pretax return from the project. Existing law, moreover, gives a ...

This shelf project proposal covers several expenditures that are allowed as expenses as soon as they are incurred under current law but should be treated as capital expenditures. Given the treatment of debt financing, capitalization is needed to prevent negative tax or subsidy for investments, many with dubious merit. The ...

A common trust fund (CTF) is a fund maintained by a bank exclusively for the collective investment of the funds of trust clients. Under section 584 of the code, a CTF pays no tax, but each participant must include its proportionate share of income and losses computed at the CTF ...

Under current law, if a corporate acquisition qualifies as a reorganization, the target shareholders do not recognize built-in gain on the stock they surrender when they receive publicly traded stock. The proposal would treat sale stock would be taxed as if the stock had no sale restrictions. Restrictions on votes ...

We should be able to raise at least $1 trillion more revenue a year within the current income tax system just by making our tax accounting better reflect economic income. Our system has too many tax pits, which absorb revenue and distort investment decisions. We allow deductions for fictitious losses. ...

Under current law, taxpayers can receive cash but not pay tax on it because the cash is considered deferred revenue. When a taxpayer writes an option or sells stock short, for example, the taxpayer receives cash, but the cash is not considered gain or loss until the option is exercised ...

Costs

Of all the dispensations . . . percentage depletion is the most remarkable achievement. It enables certain taxpayers to reduce their incomes by imaginary costs. Other taxpayers are not considered so deserving. They may only deduct what they spend.

.— Louis Eisenstein, Ideologies of Taxation[1]

The proposal would limit the exclusions allowed ...

Andrew Pike

Eric A. Lustig

Life insurance contracts often combine a savings or investment element with pure insurance protection that covers the risk of death during the year. Current law will tax the buildup in the value of a ‘‘life insurance contract’’ only if the policy is surrendered for its cash value ...

Cash withdrawn from appreciated property using financial instruments has become a major source of untaxed support for the standard of living of our wealthiest citizens.

The proposal would treat cash received under a contract for sale of property or for writing an option on property as realization of gain to the ...

A. Overview

Serious long-term tax reform will need to limit the considerable tax advantages now available in owning the very largest houses and other personal-use properties. The primary return from the investment in residences and similar property is the rental value of the personal use of the house, which is always ...

This proposal would repeal section 1231, which accords capital gain treatment to gains but gives ordinary treatment to losses. That asymmetry increases the expected value of volatile investments over the pretax value of the investments. During a revenue crisis, the tax system should ...

This proposal would replace the 35 percent corporate tax on publicly traded companies with a low 20-basis point quarterly tax on the issuer on the market capitalization including both traded debt and equity. A low-yield corporate tax would remain for corporations that are not publicly traded, and for a transition ...

Current law allows a taxpayer to avoid taxation of gain on a disposition of real estate to the extent the taxpayer is willing to acquire other real estate as a replacement. The proposal would repeal section 1031 regarding gain and require an exchange broker to file an information return showing ...

Overview

The proposal would repeal for future years the exemption for interest on state and local bonds. While the exemption is supposed to help state and local borrowers, only a fraction of the federal cost of the exemption is captured by the borrowers. What is captured, in the form of lower ...

It is my pleasure to be able to contribute to an issue of the SMU Law review dedicated to Charles O. Galvin. Dean Galvin has had a long career of honorable service to the law and more specifically, to law. He is associated with many ideas, prominently, the argument for ...

Tax accounting for the oil and gas industry does not describe the economic income from the investment. Indeed, for a broad range of reasonable assumptions, oil and gas accounting delivers anti-tax or subsidies to profitable investments. The combination of four important tax preferences generates a subsidy that is a negative ...

The proposal would prevent negative capital accounts as a remedy to prevent tax shelters. It would suspend deductions that would otherwise result in the taxpayer’s adjusted basis being lower than the outstanding debt. When capital accounts are negative, the transaction is a tax shelter in which tax is negative, that ...

A. Overview

When nontaxable substitutes for cash are available, an employer and employee working in concert will inevitably shift compensation away from cash to the untaxed form. Goods and services are usually less convenient and less valuable to the employee than cash. Still, as long as the value lost is less ...

Under current law the combination of tax preferences for timber means that timber investments are subject to less than zero tax. Tax accounting should describe the economic income from timber. This proposal would treat timber as an ordinary asset, require the capitalization of all costs incurred before harvest, and allow ...