Trade or Business within the United States as an Interpretive Problem under the Internal Revenue Code: Five Propositions

Whether a particular set of activities constitute the conduct of a trade or business within the United States is an ongoing interpretive question affecting many foreign taxpayers. It controls what form of U.S. taxation, if any, applies to them. In the domestic context, a trade or business entails profit-oriented non-investment activity that is regular, continuous and considerable. It is tempting, in the transition to the international context, to conclude that the conduct of a trade or business within the U.S. requires that the taxpayer\u27s U.S. activities must be regular, continuous, and considerable, and the standard is often articulated in this quantitative manner. This Article, however, concludes that, as an interpretive matter, this approach is mistaken. Instead the Article disentangles the original inquiry into two distinct inquiries: Is the foreign taxpayer engaged in a trade or business? Is the conduct of the trade or business within the United States? The answer to the former question is quantitative. Once the existence of a trade or business is established, however, no minimum quantum of U.S. activity is necessary to bring a foreign trade or business into the United States. Instead, the necessary condition for an affirmative answer to the second question is qualitative, focusing on the types of U.S. connections rather than their regularity, continuity, or considerableness. In answering these questions, the Article advance a series of five distinct propositions that creates an interpretive reconciliation of the various authorities addressing this question

Helvering v. Gregory: All the Perspectives from which Learned Hand Was Wrong

At a fundamental level, this Article is about interpretation. The best way for a court to remain faithful to a complicated statute reflecting a delicate legislative compromise is to enforce its language literally without introducing extraneous tests or elements that cannot be found in the statutory language. Yet, it is important to be clear that it approaches the question from an ex ante perspective, from where things stood before Learned Hand\u27s famous opinion. This Article is not a call for the judicial reversal of Hand\u27s opinion. Given the value of the predictability of established expectations as to statutory meaning, stare decisis is at its strongest when applied to statutory interpretation. The business purpose requirement is now reflected in a Treasury Regulation that is entitled to a high degree of deference. Congress has had multiple opportunities to eliminate it and has not so done. No, this Article is not an argument for the judicial reversal of a familiar old decision. It advances the claim that, as of the time the court faced the decision, the outcome it selected was incorrect from multiple policy perspectives and therefore a counterproductive exercise of the interpretive authority. Moreover, at the time decided, it was a mistaken use of the interpretive authority to upset a carefully set legislative compromise in favor of the court\u27s own preferred outcome. Before proceeding, a further caveat is necessary. Although the Supreme Court upheld Hand\u27s opinion unanimously, this Article focuses primarily on Hand\u27s opinion for the Second Circuit for good reasons. His is the more frequently quoted of the two opinions. His opinion is the more extensive of the two. It sets out more thoroughly the justification for creating a business purpose requirement, while the Supreme Court opinion largely relies on its reference to Hand\u27s opinion

Constructive Dividend Doctrine from an Integrationist Perspective

A long standing feature of U.S. corporate taxation is a group of doctrinal devices serving to prevent taxpayer attempts to avoid double taxation of corporate earnings. This Article refers to these devices collectively as the constructive dividend doctrine (hereinafter “CDD”) and analyzes the extent to which the CDD ought to be set aside as counterproductive. This analysis is grounded in contrasting views of the normative tax treatment of corporate enterprise. On the one hand is the perspective in which the double income taxation of corporate income is normative (the “Double Tax Perspective”). The Double Tax Perspective calls for taxation of corporate income a first time as it is received or accrued in the corporation’s hands and a second time as those corporate earnings are distributed to shareholders. The normative shareholder treatment from the Double Tax Perspective is as full ordinary income in shareholders’ hands as corporate earnings are distributed. It treats the reduced rate capital gain taxation for most stock sales and deemed stock sales as a “narrow” exception to this norm. A contrasting perspective is one in which all income derived from a business enterprise would be taxed exactly once (the “Integrationist Norm”). Under such an idealized Integrationist Norm, all income would be imputed to individuals connected with the corporate enterprise—as shareholders or otherwise—as earned, and all income would be taxed at the individual rate schedules. In principle, the nearest one might come to such a perfect regime is the fiscal transparency of a full pass-through regime. Under such a tax regime, there would be no corporate-level tax. Instead, all of the revenue of the corporation would be taxed as income of some individual. The nearest analog is the tax treatment of partnerships. This Article is predicated on the wisdom of the Integraionist Norm. Elsewhere, in an article entitled Advancing to Corporate Tax Integration: A Laissez-Faire Approach, I advanced the proposition that, although systematic corporate tax integration is unlikely to be enacted in the foreseeable future, integrationism should be regarded as normative. The Laissez-Faire Approach proposes that, to the extent that legal mechanisms serve to prevent self-help corporate tax integration, they are counterproductive, wasting valuable taxpayer, IRS, and judicial resources. This Article analyzes the CDD in light of the Laissez-Faire Approach in order to identify circumstances in which it is best to dispense with the CDD as a counterproductive mechanism that wastes resources reinforcing the double tax anti-ideal

Semi-Markovian discrete-time telegraph process with generalized Sibuya waiting times

In a recent work we introduced a semi-Markovian discrete-time generalization of the telegraph process. We referred this random walk to as squirrel random walk (SRW). The SRW is a discrete-time random walk on the one-dimensional infinite lattice where the step direction is reversed at arrival times of a discrete-time renewal process and remains unchanged at uneventful time instants. We first recall general notions of the SRW. The main subject of the paper is the study of the SRW where the step direction switches at the arrival times of a generalization of the Sibuya discrete-time renewal process (GSP) which only recently appeared in the literature. The waiting time density of the GSP, the `generalized Sibuya distribution' (GSD) is such that the moments are finite up to a certain order $r\leq m-1$ ($m \geq 1$) and diverging for orders $r \geq m$ capturing all behaviors from broad to narrow and containing the standard Sibuya distribution as a special case ($m=1$). We also derive some new representations for the generating functions related to the GSD. We show that the generalized Sibuya SRW exhibits several regimes of anomalous diffusion depending on the lowest order $m$ of diverging GSD moment. The generalized Sibuya SRW opens various new directions in anomalous physics

Evaluation of right ventricular function performed by 3d-echocardiography in scleroderma patients

The impairment of the right ventricle (RV) in systemic sclerosis (SSc) is usually related to pulmonary arterial hypertension (PAH). New echocardiographic techniques, such as 3-dimensional echocardiography (3DE) and 2-dimensional speckle tracking (2DSTE), allow an accurate evaluation of the RV function. The aim of this study was to evaluate the RV function using 3DE and 2DSTE in SSc patients with no history of heart disease and no PAH. Forty-five SSc patients, 42 females and 3 males, 28 with limited cutaneous SSc (lcSSc) and 17 with diffuse cutaneous SSc (dcSSc), were studied. Forty-three age- and gender-matched healthy subjects were enrolled as controls. All of them underwent a 3DE and 2DSTE ecocardiographic evaluation of the RV function. Systolic pulmonary arterial pressure (sPAP) and total pulmonary vascular resistance (tPVR) were also estimated by power doppler. RV echocardiographic parameters were compared in the different subsets of SSc patients. A statistical analysis was performed by t-test, ANOVA and multiple logistic regression. RV areas in 2DSTE and volumes in 3DE were higher and RV function parameters were reduced in SSc patients compared with controls. Also sPAP and tVPR were higher, but they did not reach pathological values. Echocardiographic alterations were more pronounced in patients with lcSSc. 3DE and 2DSTE echocardiography allowed us to detect morphological and functional alterations of the RV in a group of SSc patients with no clinical signs of heart disease and no PAH. These patients had significantly higher sPAP and tPVR than healthy controls without reporting values compatible with PAH. These data suggest that RV alterations are related to a pressure overload rather than to an intrinsic myocardial involvement in SSc