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West Virginia University School of Law
Lathrop, Robert G.

Tax acts were automatically reenacted every two years
-1939-all the tax statutes were put into the tax code
-1954- major changes were made-then called the ’54 Code
-1986-another major change- so the current one is the income code of 1986, as amended
we will focus on the code, not so much the regulations
p 14…constitutional stuff
-16th amendment- talks about congress having the power to tax
p 21- tax practitioner’s tools
-the code (the law, what congress enacts)
-most important thing besides the code are committee things??
-most tax bills start out in the house and then go to the senate- those are the two groups that write the tax laws
-frequently look like committee reports- want to try to figure out what Congress’s intent was
bulletin’s put out once a week keeping you updated on new bills and some have the committee reports
p 25- Treaties
-generally, treaties supersede code
Administrative materials
-the regs are put out by the IRS-the service’s interpretation of the code
-if you want to challenge a reg, show that it is not a reasonable interpretation of the code
-that is for general regs
-sometimes the code may specifically say that the code be interpreted under some specific thing-those regs carry more weight (??)
revenue rules
-service states the facts to get the results it wants-reg rules make it simple- make sure it isn’t so simple that …
-biggest problem in practice is figuring out what the facts are
weekly bulletin from the Service
-aquises or nonaquieses in tax court opinions- so the service acquises or non acquiesces with those opinions
judicial materials- three courts you can go to to start a tax controversy
-US tax court- based in DC but travels around the country
-US district court
-federal claims court
-can go to tax court before you pay your tax- most cases go
-others, have to pay your tax, have it denied…
-so a lot of forum shopping
-just have to take a good look at the cases in those three jurisdictions and see where you are going to get the most favorable treatment
-may have more luck in US district court- the tax court judges are expert tax lawyers, very well versed/specialized
-appeal from tax court would go to WV district court, for example
Unofficial tax materials
-reporters- statute, regs, and annotations, and an explanation
-text-see book
-tax management portfolios
-others also…
-tax law review (NYU)
-anything by Warn, Gorman, Lamont, is good tax stuff
tax policy
-civil end have a lower burden of proof than criminal does
-the Service has lawyers all over- big ones, ruins division and tax corp.- could get pigeon holed in ruins-
1/11/06- Wednesday
Section 61
-income including more than just wages
Cesarini v. U.S., p 49
-tax year of 1964- year the transaction that they are reporting for occurred (but is reported in April of 1965)
-bought the piano in 1957, in 1964, they found over 4,000 dollars inside the piano- file a refund claim- service denies the claim- then they go to court
-argue three things- shouldn’t be included in gross income, statute of limitations (if tax year is 1957), or should be entitled to capital gains treatment
-filing an estimated return if you sell a lot of stock or something???
-is included in gross income- section 61(a) is very broad (1)-(15)- language in general is very broad- those 15 don’t include found moneies- but the other thing doesn’t specifically exclude it- 61(a) flush (the statute without any of the subsections)-this stuff is included unless it is specifically excluded—so treasure trove is income
-regs that neither party cites, but it says that treasure trove is income
-tax year is 1964, not 1957-since that is when they found the money-statute of limitations on service’s ability to make an assessment for an additional tax is –title vested when the money is actually found- must find the money in order for it to actually be vested-that’s when they had title to it against all but the true owner
-capital gains treatment- tax rate would have been much lower-case doesn’t address this
-note- if you find property, you may have an argument that it isn’t income until you sell it
section 61
(a) is a subsection
(1) is a paragraph
if there was an (A), it would be a sub-paragraph
Old Colony, p 54
-Wood was president of company- company had thing where it would pay his income taxes- so pays like over 600,000 in 1919 for 1918’s income
-Board of Tax Appeals say that these taxes count as income- so income taxes paid on 1918’s salary in 1919 counts as income for 1919- this is an economic gain which should be included in his income- it is compensatory
-the discharge of a third person of an obligation to him is equivalent to receipt by the person taxed
-not a gift because it was given in consideration for his work there, was not fortuitous
-tax upon a tax- service didn’t try to do this and it was never argued before the lower court
-tax years are 1919 and 1920- he made the money in 1918 and 1919, but the taxes were paid in 1919 and 1920-those taxes paid were considered income for 1919 and 1920
Glenshaw Glass, p 56

a new car worth 15,000- none of that would have happened except for the employer/employee relationship (so it is compensatory)- if you get property instead of cash, you still have to account for it-
-the car- if you treat it as a transfer to the employee you could say it is compensation and so taxable
-if you say it is given directly from employer to employee’s wife, you could say it is a gift and so it would not be taxable
4. a. yes b. yes, even illegal income is taxable
-then other party could get a deduction when he files his for kickbacks-but may have a problem if it violates local law
5. a. $4,000- it is all part of the rental deal; b. no, the benefit that she gets remains the same regardless of how much it costs tenant to do the work; c. he technically has a 2,500 gain- but wouldn’t really report it ???
-if the improvements are rent- then it is income to the landlord
-if it isn’t rent, then it’s a different story- not income to the owner, yet (section 109)
-could be taxed twice if he sells the property without either including or excluding???that $3000
-own labor isn’t worth anything in the tax world                                                         
1/18/06, Wednesday
6. frequent flyer miles as part of gross income
a. profit not yet realized
b. considered compensation from employer- since they’re assignable, he can presumably sell them- would be income
c. not assignable so couldn’t really determine the value- if you tried to have them taxed you wouldn’t know how much they should be taxed for
d. determine the cost of the trip had it not been paid for and taxed on that
if flying for his employers on credits he accumulated while taking trips for the employer-not income???
Service finally says that they won’t come down on them even if used for personal use-
-because there are a thousand different ways they can be used- never use them, trade them in for something else, discount with them- so IRS not going to fool with them (since 2002)
-not that it isn’t technically income, but its administratively impossible to pick this stuff