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Monday, September 18, 2017

Is Anti-Tax Sentiment Weakening? 

For almost two decades, Americans have been told, time and again, that they oppose tax and fee increases. Enormous sums of money have been plowed into efforts to persuade Americans that taxes are a bad thing and to persuade legislators to refrain from enacting or increasing taxes and to reduce or repeal those that exist. Some people have made careers out of, and have profited from, anti-tax campaigning.

According to a new survey from HNTB Corporation, 70 percent of Americans are willing to pay higher taxes and tolls to build, repair, and maintain roads, tunnels, and bridges. Some prefer higher taxes, some prefer tolls and fees, and some prefer a combination. If those taxes and tolls were guaranteed to be used only for transportation projects, the approval percentage increases from 70 to 84. According to the survey, 80 percent support tolls on existing highways, including interstate highways, if the revenue was used for specific purpose. Of those polled, 41 percent support tolls to reduce congestion, 40 percent support tolls to improve safety, 34 percent support tolls to add capacity, and 21 percent support tolls to add or improve adjacent public transportation to relieve congestion. The other 20 percent are opposed to tolls under all circumstances. Apparently they were not asked how they would fund highway repairs.

So how is it that we are told that Americans, or at least a majority of them, oppose taxes, fees, and tolls, and yet surveys – the HTNB poll being but one – indicate that most Americans support taxes, fees, and tolls for transportation infrastructure? Have Americans changed their minds? Or has there been a misrepresentation of American opinion, making the desires of an elite few appear to be the clamor of the general populace? Perhaps it is a mixture of both.

It is not unlikely that Americans, having seen the real-world impact of the theoretical tax-cuts-for-the-few-benefit-the-many nonsense, are beginning to understand the connection between government revenue and life convenience. For several decades, resistance to increases in fees and taxes, such as the liquid fuels tax, has gifted Americans with more potholes and the attendant costs, both human and monetary, of inadequate funding. How many Americans realize that during the past four years, 26 states have increased liquid fuels taxes?

The key, I think, is making certain that Americans receive services in exchange for the taxes that they pay. There appear to be people who think that they should go through life enjoying public benefits, such as roads, without paying taxes. Though some might take that position through selfishness, there surely are those whose attitude arises from ignorance. It is essential that public officials explain to constituents where their tax, fee, and toll dollars go. Eventually, the anti-tax crowd, aside from the anti-government anarchists, will realize that Americans do not oppose taxes or even tax increases, but oppose irrational taxes, inexcusable tax systems, and oligarchic tax policies.

Friday, September 15, 2017

A Tax Challenge: Simplicity Versus Fairness 

Taxpayers complain about the complexity of tax laws and tax forms, to say nothing of the inconvenience of keeping records and digging up information in order to comply with tax laws. But taxpayers also complain when they perceive tax laws to be unfair, and those complaints are a seemingly never-ending stream. But is there not a conflict between simplicity and fairness?

Critics of the income tax, who see it as too complicated, often point to the sales tax as an example of a simple tax. Yet the sales tax is not simple, as anyone who has dug through the list of items subject to, and exempt from, the tax can attest. Worse, there isn’t one sales tax, but dozens, even hundreds, because sales taxes apply at state and local levels. Accompanying the sales tax is the use tax, designed to fill in the gap caused by taxpayers subject to a sales tax making purchases outside the jurisdiction. During the past decade, the rise in online purchases has generated sales and use tax revenue declines.
For years, enforcement has relied on voluntary reporting. Not surprisingly, compliance has been terrible. With the onset of online transactions, jurisdictions turned increasingly to the vendors, trying to compel or persuade them to collect the use tax on behalf of the jurisdiction. Success has been spotty. I have written about this challenge in more than a dozen commentaries, starting with Taxing the Internet, and continuing through Taxing the Internet: Reprise, Back to the Internet Taxation Future, A Lesson in Use Tax Collection, Collecting the Use Tax: An Ever-Present Issue, A Peek at the Production of Tax Ignorance, Tax Collection Obligation is Not a Taxing Power Issue, Collecting An Existing Tax is Not a Tax Increase, How Difficult Is It to Understand Use Taxes?, Apparently, It’s Rather Difficult to Understand Use Taxes, and Counting Tax Chickens Before They Hatch, A Tax Fray Between the Bricks and Mortar Stores and the Online Merchant Community, and Using the Free Market to Collect The Use Tax.

The Vermont Tax Department, according to this story, is trying to boost voluntary compliance. It is inviting Vermont residents to pay past due use taxes, with an incentive in the form of interest and penalty waivers. Vermont offers two methods of computing the tax. One is to maintain a list of all purchases subject to the use tax, to add up the prices, and to multiply by the tax rate. The other is to pay an amount based on the taxpayer’s adjusted gross income.

The choice presented to Vermont taxpayers illustrates the tension between complexity and fairness. Keeping track of all out-of-state and online purchases is inconvenient, perhaps annoying, and usually difficult. At the time of each purchase, or thereafter, the taxpayer must determine if the item is subject to, or exempt from, the use tax, and must also determine whether the item was brought back to, or shipped into, Vermont. Calculating a tax based on adjusted gross income is much simpler, but it generates unfair results because two people with the same adjusted gross income ought not pay the same use tax if one has made many taxable purchases and the other has made far fewer taxable purchases. The latter situation arises if the person saves a substantial portion of income, or makes large payments for nontaxable expenses, such as tuition.

The choice presented to Vermont taxpayers is not unlike the choice given to taxpayers who are, or were, eligible to deduct state and local sales and use taxes on their federal income tax returns. Taxpayers can keep track of what they paid, or use a table based on income, state of residence, and number of exemptions. The table is very popular, but in this instance the perception of unfairness is dampened by the fact it is generating a tax benefit and not a tax liability even though economically one can demonstrate differences in tax liability when using the table in comparison to using itemized receipts.

It has been known for as long as taxation has existed that every attempt to make a tax fairer requires adding complexity. Every exception, exemption, reduction, alternative, or adjustment requires additional language and lines on tax forms. Every one of those tweaks opens up additional possibilities for disagreement and generates additional hours of research, preparation, compliance, disagreement, and litigation. Even though many people clamor for a simple tax system, there is no doubt that implementation of a simple system, or even a simpler system than now exists, will generate as many, or more, cries for fairness that erodes the simplicity. This is a tax fact of which no taxpayer should be ignorant.

Wednesday, September 13, 2017

Mileage-Based Road Fees: A Positive Trend? 

Unquestionably, I am a fan of mileage-based road fees. Those fees are a sensible and efficient method of funding highway repairs and maintenance, a worthy replacement for the increasingly antiquated liquid fuels tax, and a much more equitable way of matching costs with users. I have written about these fees for almost 13 years, beginning with Tax Meets Technology on the Road, and continuing through Mileage-Based Road Fees, Again, Mileage-Based Road Fees, Yet Again, Change, Tax, Mileage-Based Road Fees, and Secrecy, Pennsylvania State Gasoline Tax Increase: The Last Hurrah?, Making Progress with Mileage-Based Road Fees, Mileage-Based Road Fees Gain More Traction, Looking More Closely at Mileage-Based Road Fees, The Mileage-Based Road Fee Lives On, Is the Mileage-Based Road Fee So Terrible?, Defending the Mileage-Based Road Fee, Liquid Fuels Tax Increases on the Table, Searching For What Already Has Been Found, Tax Style, Highways Are Not Free, Mileage-Based Road Fees: Privatization and Privacy, Is the Mileage-Based Road Fee a Threat to Privacy?, So Who Should Pay for Roads?, Mileage-Based Road Fee Inching Ahead, Rebutting Arguments Against Mileage-Based Road Fees, On the Mileage-Based Road Fee Highway: Young at (Tax) Heart?, To Test The Mileage-Based Road Fee, There Needs to Be a Test, What Sort of Tax or Fee Will Hawaii Use to Fix Its Highways?, And Now It’s California Facing the Road Funding Tax Issues, If Users Don’t Pay, Who Should?, Taking Responsibility for Funding Highways, Should Tax Increases Reflect Populist Sentiment?, and When It Comes to the Mileage-Based Road Fee, Try It, You’ll Like It.

When something new is proposed, it is not uncommon for many people, even if they are not natural skeptics, to hesitate and to doubt. A fine way to overcome doubts before committing to a permanent change is to sample the idea, to test the concept, to try a temporary test, or to engage in a pilot program. That is what states have been doing with the mileage-based road fee proposal. According to the Mileage-Based User Fee Alliance, at least 9 states, one city, and one multistate interstate group have engaged in, or are engaging in, pilot projects. Now comes news that Utah is preparing to set up a pilot project.

As more states, and localities, experiment with mileage-based road fees, and as the pilot projects continue to return mostly positive outcomes, general acceptance of the idea will grow. Better yet, as the pilot projects are undertaken, snags in the implementation can be identified and worked out, improvements can be made, and more can be learned about the best way to explain how mileage-based road fees work. Like the often-mentioned snowball rolling down the hill, this trend suggests that mileage-based road fees have a better chance of being universally adopted long before self-driving vehicles totally displace vehicles with human drivers.

Monday, September 11, 2017

When Tax Scammers Sue Each Other 

Readers know that I watch television court shows in search of good tax stories. They know this because they’ve seen a long parade of commentaries on those shows, starting with Judge Judy and Tax Law, and continuing with Judge Judy and Tax Law Part II, TV Judge Gets Tax Observation Correct, The (Tax) Fraud Epidemic, Tax Re-Visits Judge Judy, Foolish Tax Filing Decisions Disclosed to Judge Judy, So Does Anyone Pay Taxes?, Learning About Tax from the Judge. Judy, That Is, Tax Fraud in the People’s Court, More Tax Fraud, This Time in Judge Judy’s Court, You Mean That Tax Refund Isn’t for Me? Really?, Law and Genealogy Meeting In An Interesting Way, How Is This Not Tax Fraud?, A Court Case in Which All of Them Miss The Tax Point, Judge Judy Almost Eliminates the National Debt, Judge Judy Tells Litigant to Contact the IRS, People’s Court: So Who Did the Tax Cheating?, “I’ll Pay You (Back) When I Get My Tax Refund”, Be Careful When Paying Another Person’s Tax Preparation Fee, Gross Income from Dating?, Preparing Someone’s Tax Return Without Permission, When Someone Else Claims You as a Dependent on Their Tax Return and You Disagree, and Does Refusal to Provide a Receipt Suggest Tax Fraud Underway?.

Readers also know that I haven’t had the time or opportunity to watch all of them. So when they come upon a show they think I haven’t seen, because there’s no commentary on this blog about the show, they send me a link. Not long ago, a reader directed me to this Judge Judy episode. For many people, tax professionals and others alike, it provides insight into how a particular tax scam works.

The plaintiff and the defendant had been a couple, but were not married. The defendant had a child from an earlier relationship. The plaintiff explained that he had been led to believe he was the father of a child whose mother was a woman who lived in the Bronx. When it came time for the plaintiff to file his 2009 federal income tax return, the defendant, knowing that the child’s mother needed help and wanting to help her, mentioned this to the defendant. The defendant, or her sister, a tax return preparer, allegedly told the plaintiff that the best way to help the mother was to claim the child as a dependent and apparently to give her the tax refund generated by the dependency exemption deduction and child tax credits. According to the plaintiff, the defendant’s sister prepared the return, and asked him how he wanted to receive the refund. Because he had no bank account, he told her to have it mailed to him. Then, according to the plaintiff, the defendant’s sister called and told him the refund would arrive more quickly if it were sent to a bank account, so she persuaded him to let it be deposited in the defendant’s bank account, and then the defendant would give the money to the plaintiff. The refund went into the account, but the defendant did not pay it to the plaintiff. The plaintiff sued. The defendant justified keeping the money because of the plaintiff’s bad temper and some things he had allegedly damaged. The defendant claimed that the plaintiff had agreed she could keep the money, but the judge did not believe her.

Judge Judy began by interrogating the plaintiff. He explained that he claimed two exemptions on the return, himself and the child. The child lived with the child’s mother. In response to whether he supported the child, the plaintiff stated that he watched him, took care of him, and gave him some things that the child needed. The plaintiff did not live with the child or the child’s mother. There was no child support order in place, and the child’s support came from welfare payments. Judge Judy then asked, “So your son is on welfare and you claim him as a dependent?” The plaintiff explained that the child’s mother had told him it was his child, but then in March of 2010 he discovered it was not his child.

Judge Judy explained to the plaintiff that by claiming the child as a dependent, the size of the refund was enlarged. But because the child is not a dependent, the plaintiff is not entitled to the portion of the refund attributable to claiming the child, the IRS wants the money back. So the judge said to the plaintiff, if the defendant were ordered to pay the money to you, I assume you will return it to the IRS. She then pointed out, “We can do that for you.”

Judge Judy asked the plaintiff the age of the child. The plaintiff said, “Four.” The judge asked if he had claimed the child as a dependent on tax returns for earlier years. The plaintiff replied, “No.” The judge asked, if you thought the child was yours, why did you not claim the child in the earlier years? The plaintiff did not provide an explanation. Asked who prepared his tax returns in earlier years, he replied, “H&R Block.”

The judge then asked the plaintiff, “So why did you claim child in 2010?” That is, why did you claim him on your 2009 income tax return when it was being prepared in 2010? The plaintiff said that the defendant’s sister, the tax return preparer suggested it. But then plaintiff said that it was the child’s mother who said he could claim the child.

Judge Judy asked to see the return. It was filed in March 2010. On further inquiry, the plaintiff claimed that it was after the return was filed that he discovered that the child was not his.

Judge Judy told plaintiff that he needed to file an amended return, removing the child as a dependent. She dismissed the plaintiff’s case based on the doctrine of clean hands, because she did not think he had done things properly with respect to the return.

Turning to the defendant, the judge asked “What do you have to do with this man’s tax returns?” The defendant explained that the plaintiff did not claim the child in question as a dependent, but claimed the defendant’s grandchildren as dependents. When asked to explain the relationship, the defendant said that the children in question were the children of a woman she had raised. That woman is the mother of two children, one of whom was the child the plaintiff claimed. When asked, the defendant admitted she had not adopted the woman in question. Thus, concluded Judge Judy, the alleged grandchildren were not the defendant’s grandchildren.

Judge Judy, not surprisingly, concluded that the entire set of transactions constituted a scam. She concluded that the defendant was complicit in the scam. She announced her intention to notify the IRS that the defendant has the money fraudulently received from the IRS as a result of the scam.

That there was a scam was obvious from two perspectives. First, the facts did not fit. The plaintiff supposedly thought a child was his, yet did not claim the child until the child was four years of age. The identity of the child was in dispute. The depositing of the refund into the bank account of someone other than the taxpayer is a red flag. The child’s mother was not someone in need of a dependency exemption. Second, the demeanor of the parties, along with the changes in parts of the story as the trial developed, suggested that they had broken one of the rules of conspiratorial scamming, that is, agree on one story and stick with it.

It’s unclear who the parties wanted to be the ultimate recipient of the money. Either the defendant or the mother of the children, or both of them, thought they would receive or split the refund. Perhaps the plaintiff was going to get a cut of the refund, but because he received nothing, it is possible that he was indeed duped by the defendant and her sister. It’s possible that the child’s mother was unaware of the scam, and perhaps was not going to receive anything. As I listened to the defendant’s voice beginning to shake, I got the sense that she didn’t anticipate encountering a judge who would break through what the defendant thought was going to be some sort of contract dispute to unearth the tax fraud. I wonder if the plaintiff filed an amended return, though hopefully someone would explain how that would be even a better outcome in terms of dealing with the defendant than suing. I wonder how things turned out between the IRS and the defendant.

Friday, September 08, 2017

When It Comes to the Mileage-Based Road Fee, Try It, You’ll Like It 

It has been almost 13 years since I first wrote about the mileage-based road fee. At the time, it was an idea, one that addressed the ever-growing problem of declining liquid fuel tax revenue attributable to increases in fuel efficiency and the use of vehicles not using liquid fuels. It was attacked, and continues to be attacked, on a variety of grounds, none of which stand up under careful scrutiny. Over the years, I have returned time and again to this issue, sometimes in response to renewed objections, sometimes to describe yet another mileage-based road fee pilot program, and sometimes to focus on the connection between usage and financing. The list of my commentaries continues to grow, starting with Tax Meets Technology on the Road, and continuing through Mileage-Based Road Fees, Again, Mileage-Based Road Fees, Yet Again, Change, Tax, Mileage-Based Road Fees, and Secrecy, Pennsylvania State Gasoline Tax Increase: The Last Hurrah?, Making Progress with Mileage-Based Road Fees, Mileage-Based Road Fees Gain More Traction, Looking More Closely at Mileage-Based Road Fees, The Mileage-Based Road Fee Lives On, Is the Mileage-Based Road Fee So Terrible?, Defending the Mileage-Based Road Fee, Liquid Fuels Tax Increases on the Table, Searching For What Already Has Been Found, Tax Style, Highways Are Not Free, Mileage-Based Road Fees: Privatization and Privacy, Is the Mileage-Based Road Fee a Threat to Privacy?, So Who Should Pay for Roads?, Mileage-Based Road Fee Inching Ahead, Rebutting Arguments Against Mileage-Based Road Fees, On the Mileage-Based Road Fee Highway: Young at (Tax) Heart?, To Test The Mileage-Based Road Fee, There Needs to Be a Test, What Sort of Tax or Fee Will Hawaii Use to Fix Its Highways?, And Now It’s California Facing the Road Funding Tax Issues, If Users Don’t Pay, Who Should?, Taking Responsibility for Funding Highways, and Should Tax Increases Reflect Populist Sentiment?.

Now comes news that the state of Washington has enlisted 2,000 volunteers to participate in a pilot program, at least the seventh state to do so. The participants won’t be paying the fee, but simply measuring what they would be paying if the fee were real, and comparing it to what they pay in liquid fuel taxes. Washington is initiating the pilot program for the same reasons other states have done so or are considering doing so. Washington is watching road construction and repair costs growing by 2.6 to 3.1 percent a year due to inflation, while fuel tax revenue increases by 0.7 to 0.9 percent.

Even though the pilot program is voluntary and costs the participants nothing, while perhaps satisfying the curiosity of some or all of them, in this survey of Washington residents, 58 percent opposed the idea. Yet in California, which conducted a pilot program with 5,000 participants, post-program surveys revealed that 85 percent of the participants were satisfied with the program, and 73 percent concluded that the mileage-based road fee is more fair than a liquid fuels tax. What’s the lesson? Sometimes it makes sense to explore something, try something, study something, and examine something before reaching a conclusion. When it comes to the mileage-based road fee, many of the people who oppose it will discover that they like it.

Wednesday, September 06, 2017

The Tax Consequences of a Child’s Beauty Pageant Activities 

When a child wins money in a beauty pageant, should the gross income be reported by the child or the child’s parents? When expenses are paid in connection with a child’s beauty pageant activities, should those expenses, if deductible, be deductible by the child or the child’s parents? Those questions might appear to be invented for a test or exam in a basic federal income tax course, but they arise from a recent case.

In Pedrgon v. Comr., T.C. Memo 2017-171, one the taxpayers’ children participated in various beauty pageants. In 2011, the taxpayers paid $21,732 for travel, outfits, and other costs, and in 2012 they paid $15,445 for these items. In 2011, the child won $1,325 and in 2012, $1,850. On the advice of their tax return preparer, the taxpayers included the winnings in gross income on their 2011 and 2012 federal income tax returns, and they deducted the expenses, reporting the income and expenses on Schedules C. The preparer based his advice on his understanding of the child labor laws of the state in which the taxpayers lived. The IRS disallowed the deductions, explaining that the income and deductions of the child must be reported by the child on the child’s own income tax return.

The Tax Court agreed with the IRS. Under section 73(a), amounts received in respect of the services of a child are treated as the child’s gross income and not the gross income of the parent. Before the predecessor of section 73 was enacted in 1944, income received in respect of the services of a child was reported by parents who held rights to those services under local law. Because local laws varied from state to state, Congress enacted what is now section 73 in order to create uniformity. Similarly, under section 73(b), all expenditures attributable to amounts included in the child’s gross income solely by reason of section 73(a) are treated as paid or incurred by the child, even if the parent makes the expenditure. Thus, the gross income from, and any deductions attributable to, the child’s beauty pageant activities ought not to have been reported on the taxpayers’ tax returns. Though the taxpayers perhaps considered this outcome to be ugly, the court got it right.

The good news for the taxpayers was the Court’s determination that they relied in good faith on their tax preparer. Thus, they escaped liability for the accuracy-related penalties that the IRS had asserted.

Even if section 73 did not exist, the taxpayers’ attempt to deduct expenses that were 8 and 15 times the income that was generated would raise section 183 questions. Did the child, or the taxpayers, engage in the beauty pageant activities with the intent to make a profit? Though it is a fact question, it would not be surprising to discover, had the issue been reached, that a court would conclude that it was not a for-profit activity.

Monday, September 04, 2017

Taxing What Doesn’t Exist 

As I mentioned a bit more than a year ago, in Taxation of Androids and Robots, and Similar Pressing Issues, I often use “tax consequences of time travel” as an example to law students in my attempt to warn them about drifting from the practical into the theoretical when doing so is inappropriate. Would it make sense for a government, whether federal, state, or local, to consider enacting a tax on time travel? One’s reaction surely would be, “No!” but a recent development causes me to think it could happen.

According to this report, the City Council of Broadview Heights, Ohio, is considering a proposal to raise its hotel tax from 7 percent to 10 percent. The catch? There are no hotels in Broadview Heights. The last hotel in the city closed about six years ago. The city council president who made the suggestion to raise the rate noted, “Now is the time to do it, when we don’t have a hotel. At least they [referring to hotels] will know what they’re getting into.” Or perhaps there are no hotels in town to lobby against the increase, which would bring the rate to double or triple the rate charged in the several other cities and towns that have hotel taxes.

A thought that passed through my brain was the possibility that the goal of the tax increase is to deter hotels from operating in the city, considering that it would generate a tax two to three times those applicable in other towns. But that idea was evicted from my mind as I continued to read the report. The city council president added, “The higher tax would bring a better hotel than what we’ve had in the past.” Really? So on the one hand there are state and local governments that hand out tax breaks to lure businesses into staying in, or relocating to, the jurisdiction, and yet here, on the other hand, is a proposal that increasing taxes will attract business. Perhaps the idea is that a higher tax generates higher prices, which would encourage the building of a hotel that caters to more economically blessed patrons. Is it an attempt to keep out budget-conscious folks who struggle economically?

To the extent that certain types of taxation is seen as a tool to discourage particular activities and behaviors, such as tobacco and gambling taxes, will governments consider enacting taxes on time travel even though time travel does not (yet) exist in an attempt to discourage research into time travel? Imagine the threat that time travel poses to governments and politicians.

Friday, September 01, 2017

Federal Income Tax Statutes Supersede Treasury Regulations  

From time to time, when teaching the basic federal income tax course, a student would approach and explain that he or she was confused because something in the assigned regulations was inconsistent with what was in the statute. The best example is the personal and dependency exemption deduction amount. Though changed from time to time when Congress amended the statute and when adjusted for inflation, the regulations continued to refer to a now outdated $600 amount. I explained to the student, and the class, that with a long list of regulations projects, editing an amount in a regulation was given low priority because it was something people could, and should, figure out for themselves.

Confusion over the relationship between Internal Revenue Code and Treasury Regulations apparently is not limited to students in basic federal income tax courses. It popped up in a recent Tax Court case, Mitsubishi Cement Corp. v. Comr., T.C. Memo 2017-160. The taxpayer produced finished cement. One of the ingredients in its product is calcium carbonate which the taxpayer mines at one of its locations. The taxpayer computed depletion with respect to the calcium carbonate by deducting 15 percent of gross income from mining. The IRS argued that the taxpayer was limited to 14 percent of gross income from mining. The taxpayer relied on Treasury Regulation section 1.613-2(a)(3), which provides that 15 percent is the applicable percentage depletion rate for “minerals listed in this subparagraph,” which includes calcium carbonates. The taxpayer argued that the regulation is “an agency pronouncement that should be deemed a concession or stipulation” by the IRS. The taxpayer also cited Rev. Rul. 66-24 as evidence that the IRS has “valid[ated]” the rate provided in regulations section 1.613-2(a)(3), although that ruling concerned the application of the regulation to refractory and fire clay, and not to calcium carbonates. The taxpayer also offered an argument based on the legislative nature of regulations adopted under section 611.

The court, however, pointed out that the taxpayer ignored “the timing of the regulations in relation to the change in the controlling statute.” The court explained that the language in the regulations was adopted in 1960, when the statute provided a percentage rate of 15 percent for calcium carbonates. The Tax Reform Act of 1969 amended the statute, lowering the percentage to 14 percent. Thus, the percentage in the statute superseded and made obsolete the percentage in the regulations. The court also reminded the taxpayer that an agency regulation cannot supersede the language in the statute.

This is another instance in which amendment of a regulation provision has been assigned a low priority. The pace at which Congress amends the Internal Revenue Code outstrips the pace at which the limited number of attorneys in Treasury and in the Chief Counsel’s Office can update or draft regulations. Changing the number “15” to “14” is something that, like the personal and dependency exemption deduction amount, people can, and should, figure out for themselves.

This is another example of why, when conducting tax research, a person must begin with an identification of the applicable Code provision. There are many ways of doing that identification. But once accomplished, the next step is to read that Code provision. Reading something else, whether a treatise, a commentary on the web, a pamphlet, or some other material, is dangerous because it might be outdated. In this manner, when next turning to an explicatory aid, the researcher should recognize inconsistencies between what is being examined and what was read in the Code provision, thus alerting the researcher to a possible conflict. That conflict must be resolved in favor of the Code provision.

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