Who Should be Entitled to Claim the New Education Credits?

Professor Coven believes that the education assistance provisions enacted in 1997, while long overdue, were ill-considered and poorly constructed. Focusing on what should have been the simple question of who is entitled to claim an education tax credit, this report illustrates the harm that inadequate drafting produces. While section 25A appeared to deny a credit to a dependent child, an unfair and unwise result, the proposed regulations allow parents to shift the credit to their children but only on the forfeiture of the deduction for the personal exemption. That rule, says Coven, imposes a harsh penalty on low and middle-income taxpayers but no penalty at all on high-income taxpayers. Neither result is consistent with the overall aim of the education credits. This report is an excerpt from a broader study of the drafting deficiencies in the educational assistance provisions currently being undertaken by the author. Because of the poor quality of these sections, considerable corrective legislation will be required to fulfill the promise of the 1997 legislation

What Corporate Tax Shelters Can Teach Us About the Structure of Subchapter C

Coven argues that the rules extending nonrecognition treatment to the incorporation of property never have been properly integrated with the double taxation of corporations. As a result, the duplicate burden or benefit is applied retroactively. That defect, Coven believes, has been long overlooked, but now that it has been exploited by one popular version of the loss replicating corporate tax shelter, it must be addressed. The remedy applied by Congress to the tax shelter in section 358(h) is insufficient, does not operate correctly and undermines the integrity of the code, he says. This article proposes a more comprehensive solution that would improve the code by eliminating both the benefits and the burdens of the retroactive double tax through dual basis adjustments similar to those used in partnership taxation. The article was prepared before the adoption of section 362(e)(2). That provision, however, merely underscores the need for the solution suggested here, Coven concludes

The Decline and Fall of Taxable Income

After first exploring the intellectual climate that has facilitated the congressional disregard of taxable income, this Article will examine three areas in which taxable income is no longer the exclusive mechanism for allocating the burden of taxation. That examination will outline the undesirable consequences of the decline of taxable income, and demonstrate that Congress need not have disregarded taxable income to secure the desired pattern of taxation. Because the use of multiple rate schedules constitutes the most significant deviation from the concept of taxable income in terms of the number of taxpayers that it affects and the popular resentment against the tax laws that it produces, the propriety of those schedules will be examined most extensively. Thereafter, the Article will address more briefly the increasing role of the zero bracket amount and the unhappy history of the attack on the excessive use of tax preferences. In each instance, the use of a properly revised computation of taxable income rather than a secondary mechanism to allocate the burden of taxation would produce a superior pattern of taxation, and eliminate many undesirable side effects

Who Should be Entitled to Claim the New Education Credits?

Professor Coven believes that the education assistance provisions enacted in 1997, while long overdue, were ill-considered and poorly constructed. Focusing on what should have been the simple question of who is entitled to claim an education tax credit, this report illustrates the harm that inadequate drafting produces. While section 25A appeared to deny a credit to a dependent child, an unfair and unwise result, the proposed regulations allow parents to shift the credit to their children but only on the forfeiture of the deduction for the personal exemption. That rule, says Coven, imposes a harsh penalty on low and middle-income taxpayers but no penalty at all on high-income taxpayers. Neither result is consistent with the overall aim of the education credits. This report is an excerpt from a broader study of the drafting deficiencies in the educational assistance provisions currently being undertaken by the author. Because of the poor quality of these sections, considerable corrective legislation will be required to fulfill the promise of the 1997 legislation