The Tell-Tale “Heart”: Determining “Fair” Use of Unpublished Texts

Copyright laws require that courts consider at least four factors in determining whether a quotation or close paraphrase of another\u27s unpublished work without permission falls under fair use. Several cases involving fairuse are discussed

Determination Of Jet Transport Parameters And Their Temperature Dependence In Heavy-Ion Collisions

In the continuing effort to describe properties of the quark-gluon plasma, energy loss is studied through leading order higher twist calculations of high transverse momentum single hadron suppression. Input of several values for the jet transport parameter q ̂ were used at pT ranges of ~5-20 GeV at RHIC and ~10-100 GeV at LHC, with collision centrality of 0-5%. The results of the calculations are then compiled and compared with experimental data to determine the best fit value for q ̂

Passthrough Entities: The Missing Element in Business Tax Reform

Reform of the U.S. corporate tax system is again on the agenda. Despite important differences, many current proposals share two common goals: (1) reducing the statutory corporate tax rate to improve U.S. international competitiveness and (2) broadening the corporate tax base by reducing or eliminating business expenditures to offset revenue losses. Given the significance of the passthrough sector and the relationship between individual and corporate taxes, however, such reforms need to be considered within a broader context. Part I of this article discusses the growing significance of the passthrough sector, which now accounts for roughly half of net business income. Part II explores new incentives for retaining corporate earnings and mischaracterizing labor income that would arise from an increase in individual income tax rates coupled with a simultaneous decrease in corporate tax rates, and considers the feasibility of measures to curb such sheltering within corporations. Finally, Part III urges Congress to look beyond reducing business expenditures to expand the corporate tax base and recommends consideration of an entity-level tax on certain large partnerships

Is the Corporate Tax System Broken ?

The slated expiration of the Bush Administration\u27s tax cuts in 2010 highlights the instability of the current 15% rate on dividends and capital gains. Meanwhile, pressure has mounted to reduce U.S. corporate tax rates to improve competitiveness in an increasingly global economy. Much of the 1986 Act reform of the corporate tax-base-broadening combined with lower rates - has unraveled, leaving the U.S. with a high statutory corporate tax rate and narrow corporate tax base. Despite renewed interest in base-broadening and loophole-closing, the goal of corporate tax reform remains elusive. Thus far, proponents of corporate tax reform have largely sidestepped the controversial issue of whether the 2003 tax cuts on dividends and capital gains should be made permanent. This Article proceeds in three parts. The first part discusses the long-term decline in the role of the corporate tax in raising federal revenues and enhancing progressivity. Part two discusses how the Administration\u27s 2003 proposal to eliminate double-level corporate taxation morphed into an unstable legislative compromise based on tax rate parity for dividends and capital gains. Part three considers two contrasting alternative goals reflected in current proposals for reform of business taxation: reduced corporate tax rates and enhanced expensing of new investment. The Article concludes that 1986-style base-broadening and reduced rates would improve competitiveness and limit tax sheltering opportunities, although a political consensus for such reform will be hard to forge and additional sources of revenue may be required to finance significant rate reductions

Contributions, Distributions, and Assumption of Liabilities: Confronting Economic Reality

To combat a relatively arcane international tax-shelter abuse, Congress recently amended Code sections 357 and 362 governing contributions of encumbered property to a corporation. This Article offers a critical assessment of the recent amendments to the liability assumption rules of section 357 and corresponding basis provisions of section 362. Part I explores the divergence between the former liability assumption rules and the economic benefit doctrine of the section 1001 regulations. Part II focuses on the technical definition of assumption of recourse and nonrecourse liabilities under amended section 357(d). Part III examines the corollary basis provisions of section 362, as modified to reflect the section 357(d) liability assumption rules. Part IV argues that by logical extension the amended liability assumption rules could also apply to corporate distributions of encumbered property, an area overlooked by Congress. The conclusion suggests that Congress should exercise caution in extending section 357(d) principles and reconsider the approach of ad hoc anti-abuse measures

Taxing Hot Asset Shifts

The Article comments on I.R.S. Notice 2006-14 which proposes to simplify and rationalize the collapsible partnership rules of section 751(b). It concludes that the proposed hot asset sale approach represents much needed improvement of section 751(b) but suggests that the Treasury should also consider more fundamental reform that would treat a nonprorata current distribution as a partial liquidation. The Article also explores the relationship between sections 734(b) and 751(b), focusing on the 1954 ALI proposals and Professor Andrews\u27 more recent proposals concerning hot asset distributions and mandatory basis adjustments. The Article is an outgrowth of the author\u27s work as a member of the ABA taskforce on section 751(b)

The Sound and Fury of Carried Interest Reform

Of all the proposals advanced in recent years to reform Subchapter K, the part of the Internal Revenue Code ("IRC" or "Code") governing partnership tax, perhaps none has generated more acrimony and confusion than the pending carried interest legislation contained in proposed § 710. While reformers have framed the issue of taxing the compensatory portion of a service partner’s return as ordinary income in terms of distributive justice, critics have been quick to invoke the rhetoric of class warfare to fend off reform. In the most elementary terms, the carried interest legislation would tax some (but not all) of a service partner’s share of partnership profits as ordinary income. Even at this basic level, however, the contours of the proposed legislation are ambiguous. Indeed, the reform is sometimes misdescribed as taxing "distributions" rather than "distributive shares" as ordinary income, a distinction that is fundamental. Moreover, the precise tax advantage of carried interest arrangements depends crucially on whether one adopts a "joint-tax" perspective or focuses more narrowly on the service partner’s opportunity for deferral and conversion. Apart from the merits of carried interest legislation, there is also considerable dispute over whether such reform is likely to raise significant amounts of revenue

Reframing Economic Substance

Under the economic substance doctrine as codified in 26 U.S.C. § 7701(o), legislatively unintended tax benefits may be disallowed if a transaction lacks a substantial business purpose or fails to accomplish a meaningful change in the taxpayer\u27s economic position. In a recent article on framing the “transaction” in economic substance cases, David Hariton makes three interrelated points. First, he observes that even though the judicial outcome may depend largely on how the relevant transaction is framed, few courts have explicitly focused on the framing issue. Second, he proposes that courts should presumptively frame the underlying transaction broadly by focusing on the entirety of the taxpayer\u27s undertaking, rather than disaggregating particular tax-motivated steps or structures. Finally, he believes that the principal target of the economic substance doctrine should be “tax shelters” whose defining hallmark is that they are “extraneous to the taxpayer\u27s business rather than merely an aspect of it.” In considering framing explicitly, Hariton focuses on what is arguably the most difficult issue that courts are likely to face in applying the economic substances doctrine--namely, whether to disallow tax benefits by disaggregating tax-motivated steps (which, standing alone, clearly lack economic substance) from a purported larger transaction. While Hariton understandably seeks to establish an outer boundary for Coltec\u27s disaggregation approach, his proposed presumption against bifurcation would deprive the economic substance doctrine of much of its essential flexibility. In enacting section 7701, Congress expressly approved of the disaggregation approach and gave courts broad discretion in framing the relevant transaction. Although such flexibility inevitably gives rise to uncertainty, the central question under the codified version of economic substance (as under prior law) is whether the overall result of a multi-step transaction is consistent with Congressional intent. If the tax benefits are clearly contemplated--as arguably was the case in UPS--the taxpayer should win. By contrast, transactions that seek to exploit unintended technical gaps deserve to fail. Perhaps ironically, codification may encourage taxpayers to argue that such transactions do not work technically, in the hope of avoiding strict liability penalties under section 7701

Exploiting the Medicare Tax Loophole

Section 1411 imposes a 3.8% surtax on investment income of high earners that mirrors Medicare taxes on earned income. The enactment of the net investment income tax highlights gaps in the employment tax rules for passthrough entities—particularly limited partnerships, S corporations, and limited liability companies. This Article considers how businesses can be structured to allow active high-income owner-employees of passthrough entities to avoid all three of the 3.8% Medicare taxes (SECA, FICA and section 1411). Part I considers the anachronistic limited partner exception to the SECA tax and the well-known S corporation loophole under the FICA tax, as well as the failure of section 1411 to reach active business income that avoids these employment taxes. Part II considers the recent Renkemeyer case, which has reignited the employment tax debate and threatens to upend structures used in investment and real estate funds to shelter management fees from all of the 3.8% taxes. Although repeal of section 1411 remains high on the Republican tax-cutting agenda, Part III suggests the need to reform (not repeal) section 1411 to backstop the employment tax rules for active passthrough businesses, regardless of organizational form. The proposed approach would curtail opportunities to avoid the 3.8% taxes, raise substantial revenue, and promote the goal of parity in the taxation of earned and unearned income. By contrast, tax legislation enacted in 2017 leaves intact planning to avoid employment taxes an

Exculpatory Liabilities and Partnership Nonrecourse Allocations

The rise of limited liability companies (LLCs) classified as partnerships for federal income tax purposes challenges traditional assumptions concerning the treatment of recourse and nonrecourse liabilities under Subchapter K. The complex rules of sections 704(b) and 752 give little attention to liabilities that are recourse to the entity under section 1001 but for which no member bears the economic risk of loss under section 752. In comparison to traditional general or limited partnerships, however, LLCs are much more likely to incur such exculpatory liabilities because of the limited liability shield under state law. Although exculpatory liabilities are functionally quite similar to traditional nonrecourse liabilities secured by all of an LLC\u27s assets, literal application of the section 704(b)/752 regulations with respect to such liabilities is fraught with difficulties. This article seeks to disentangle the treatment of exculpatory liabilities under the nonrecourse allocation rules and suggests several needed reforms. Although the conceptual model underlying the section 704(b)/752 regulations is derived from section 1001 and Tufts v. Commissioner, the drafters failed to clearly articulate and rationalize the manner in which the nonrecourse allocation rules deviate from the section 1001 standard. Consequently, uncertainty persists concerning the precise boundaries between the nonrecourse definitions of sections 704(b), 752, and 1001. Ultimately, such uncertainty can be dispelled only if the section 704(b)/752 regulations construct a theory of nonrecourse allocations that is explicitly independent of the section 1001 standard