Corporate Cancellation of Indebtedness Income and the Debt-Equity Distinction

This Article considers whether a corporation should have cancellation of indebtedness income (COD income) when it issues new stock or debt in exchange for its outstanding debt. It challenges the conventional wisdom about our current tax treatment of these exchanges and suggests alternative approaches. It also stresses the relationship between the COD income rules and the corporate interest deduction rules, and highlights the error correction function of the COD income rules. The current COD income rules applicable in debt-for-debt and stock-for-debt exchanges were enacted without regard for certain economic incentives they create. Consideration of these economic incentives may warrant a different set of tax rules for COD income in debt-for-debt and stock-for-debt exchanges, especially where the corporate issuer is financially distressed

The Debt-Equity Distinction in a Second-Best World

This Article discusses the time-honored but outdated tax law distinction between corporate debt and equity. Economic and legal commentators and the Treasury Department have made various proposals to eliminate the debt-equity distinction. The theory of the second best posits that eliminating an economic distortion does not necessarily increase efficiency if other economic distortions remain.\u27 Policymakers cannot simply assume that eliminating the distortionary debt-equity distinction will automatically increase efficiency because other distortions in the income tax will remain. This Article evaluates a number of the proposals to eliminate the debt-equity distinction, taking into account numerous distortions that are likely to remain in our tax system. The problems associated with the debt-equity distinction have gotten worse in recent years. Part II traces the origins and evolution of the debt-equity distinction. The debt-equity distinction has its roots in the traditional, individualistic conception of debtor-creditor relations, which treats shareholders as the owners of the corporation and debt holders as outside suppliers of capital. Things have changed since the early part of this century when Congress created the debt-equity distinction. For starters, public ownership of debt and stock has become widely dispersed, creating a separation of corporate ownership and control. The dispersion of investment led to the development of two alternative theories of the firm, investment theory and the new economic theory of the firm, both of which would treat debt and equity as qualitatively similar. The recent explosion in financial contract innovation has laid bare the deficiencies of the debt-equity distinction. The traditional multi-factor case law tests for classifying debt and equity were created in the context of closely held corporations and focus on the relation- ship between the issuing corporation and the investors. The adventurers in the business, meaning those who expose their capital to the risks of the business, are shareholders; those who do not put their capital at risk are creditors. This traditional risk-based approach to classification simply does not make sense in an era in which (1) financial contract innovation allows parties to slice and dice risk and real- locate it in just about any way imaginable, and (2) the risk premium investors have historically required to invest in stocks instead of bonds has in recent years virtually disappeared

The Tax Definition of Medical Care: A Critique of the Startling IRS Arguments in \u3cem\u3eO\u27Donnabhain V. Commissioner\u3c/em\u3e

This Article critiques the startling arguments made by the Internal Revenue Service (“IRS”) in O’Donnabhain v. Commissioner, a case in which the issue was whether a person diagnosed with gender identity disorder (“GID”) could take a federal tax deduction for the costs of male-to-female medical transition, including hormone treatment, genital surgery, and breast augmentation. Internal Revenue Code § 213 allows a deduction for the costs of “medical care,” which (1) includes costs incurred for “the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body,” but (2) generally excludes “cosmetic surgery” and “similar procedures.” Courts and the IRS interpreted the statutory definition of “medical care” consistently for decades until the IRS made a series of radical arguments in O’Donnabhain v. Commissioner. IRS opposition to O’Donnabhain’s medical expense deduction tracked the views of Dr. Paul McHugh, an outspoken opponent of medical transition for transgender persons and a member of President George W. Bush’s Council on Bioethics. In his writings, Dr. McHugh, a psychiatrist, asserts that (1) persons who “claim” to be transgender are delusional, (2) GID is deviant “behavior,” not a disease, and (3) gender confirmation surgery (“GCS”) should be prohibited as “collaborating with madness” and a moral “abomination.” Views expressed by Dr. McHugh in an article, Surgical Sex, appeared in a 2004 letter that the Traditional Values Coalition sent IRS Commissioner Everson, to demand that the IRS not allow O’Donnabhain a deduction, and in Chief Counsel Advice issued by the IRS Office of Chief Counsel. Dr. McHugh’s views also featured prominently in IRS arguments throughout the subsequent tax litigation. Incorporating excerpts from the extensive O’Donnabhain trial record (over 1,000 pages), this Article critiques the arguments made by the IRS in the case, and considers the implications of the case and the IRS’s arguments going forward—not just in the context of GCS, but also in the context of other types of medical care, including reproductive medical care. Part I analyzes the statutory definition of “medical care” and the “general well-being” and “cosmetic surgery or other similar procedures” limitations on the definition of “medical care.” Part II provides background on the facts of the case and the administrative tax controversy between O’Donnabhain and the IRS, reveals the significant influence of Dr. McHugh on the tax case, summarizes the arguments made by O’Donnabhain and the IRS in the United States Tax Court case, and discusses the Tax Court’s 2010 reviewed decision. Part III analyzes and critiques specific IRS arguments, some of which were radical departures from long-standing case law and IRS practices, and highlights similarities between (1) GCS and (2) breast reconstruction following mastectomy or lumpectomy, which the IRS acknowledges is medical care, not cosmetic surgery. Part III also considers the IRS’s arguments as a whole and concludes that the arguments the IRS made in the case are quite puzzling as a matter of tax law—but less puzzling when viewed as a covert attempt by the IRS to discourage GCS on moral grounds. In addition, Part III objects to the IRS’s negative stereotyping of O’Donnabhain, medical professionals who specialize in GID, and transgender persons in general. Part IV distills a series of rules for interpreting the § 213(d) definition of “medical care” and explores the implications of the O’Donnabhain case beyond its specific facts. Part IV also voices a concern that the IRS might deploy similar tax arguments in the future to deny deductions for other controversial medical care on covert moral grounds, particularly in the context of reproductive medical care

The Tax Definition of Medical Care: A Critique of the Startling IRS Arguments in \u3cem\u3eO\u27Donnabhain V. Commissioner\u3c/em\u3e

This Article critiques the startling arguments made by the Internal Revenue Service (“IRS”) in O’Donnabhain v. Commissioner, a case in which the issue was whether a person diagnosed with gender identity disorder (“GID”) could take a federal tax deduction for the costs of male-to-female medical transition, including hormone treatment, genital surgery, and breast augmentation. Internal Revenue Code § 213 allows a deduction for the costs of “medical care,” which (1) includes costs incurred for “the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body,” but (2) generally excludes “cosmetic surgery” and “similar procedures.” Courts and the IRS interpreted the statutory definition of “medical care” consistently for decades until the IRS made a series of radical arguments in O’Donnabhain v. Commissioner. IRS opposition to O’Donnabhain’s medical expense deduction tracked the views of Dr. Paul McHugh, an outspoken opponent of medical transition for transgender persons and a member of President George W. Bush’s Council on Bioethics. In his writings, Dr. McHugh, a psychiatrist, asserts that (1) persons who “claim” to be transgender are delusional, (2) GID is deviant “behavior,” not a disease, and (3) gender confirmation surgery (“GCS”) should be prohibited as “collaborating with madness” and a moral “abomination.” Views expressed by Dr. McHugh in an article, Surgical Sex, appeared in a 2004 letter that the Traditional Values Coalition sent IRS Commissioner Everson, to demand that the IRS not allow O’Donnabhain a deduction, and in Chief Counsel Advice issued by the IRS Office of Chief Counsel. Dr. McHugh’s views also featured prominently in IRS arguments throughout the subsequent tax litigation. Incorporating excerpts from the extensive O’Donnabhain trial record (over 1,000 pages), this Article critiques the arguments made by the IRS in the case, and considers the implications of the case and the IRS’s arguments going forward—not just in the context of GCS, but also in the context of other types of medical care, including reproductive medical care. Part I analyzes the statutory definition of “medical care” and the “general well-being” and “cosmetic surgery or other similar procedures” limitations on the definition of “medical care.” Part II provides background on the facts of the case and the administrative tax controversy between O’Donnabhain and the IRS, reveals the significant influence of Dr. McHugh on the tax case, summarizes the arguments made by O’Donnabhain and the IRS in the United States Tax Court case, and discusses the Tax Court’s 2010 reviewed decision. Part III analyzes and critiques specific IRS arguments, some of which were radical departures from long-standing case law and IRS practices, and highlights similarities between (1) GCS and (2) breast reconstruction following mastectomy or lumpectomy, which the IRS acknowledges is medical care, not cosmetic surgery. Part III also considers the IRS’s arguments as a whole and concludes that the arguments the IRS made in the case are quite puzzling as a matter of tax law—but less puzzling when viewed as a covert attempt by the IRS to discourage GCS on moral grounds. In addition, Part III objects to the IRS’s negative stereotyping of O’Donnabhain, medical professionals who specialize in GID, and transgender persons in general. Part IV distills a series of rules for interpreting the § 213(d) definition of “medical care” and explores the implications of the O’Donnabhain case beyond its specific facts. Part IV also voices a concern that the IRS might deploy similar tax arguments in the future to deny deductions for other controversial medical care on covert moral grounds, particularly in the context of reproductive medical care

"A great army of instruction" : American teachers and the negotiation of empire in the Philippines

In the summer of 1901, the United States government began a project of colonial education in the Philippines, sending close to one thousand teachers to the newly-acquired colony. These teachers, called “Thomasites,” were part of a wider justification of empire, which was intimately linked with notions of manly duty, masculine endeavor, and the innate superiority of whiteness. However, all of the American teachers headed for the Philippines, male and female, black and white, engaged with the idea of strenuous living and imperial duty, viewing themselves as personally adventurous, as well as integral members of the imperial project. More so than any other group, these teachers were positioned between the colonial administration and the Filipino people. It was the teachers who were often responsible for implementing colonial policies on the ground and for representing American government and values to Filipinos. Their position as imperial mediators allowed the teachers to create roles for themselves that would not have been possible at home, which both complemented and challenged official visions of empire. Examining these teachers’ negotiations with American officials and Filipinos illuminates the gulf between official policies and the day to day functioning of empire, demonstrating how the implementation of empire on the ground often deviated from the expectations of the colonial state. Rather than construing their experiences as expressions of maternalism – which many scholars argue was the linchpin of women’s Progressive Era politics – white female teachers in the Philippines constructed identities as adventurers, imperial officials and professionals. African American teachers, on the other hand, used their positions within empire to disrupt the linking of civilization and modernity with whiteness. Black teachers argued that their racial sympathy with the Filipino people made them most fit to be benevolent colonizers, and linked racial oppression in the United States to the imperial mission in the Philippines. This dissertation examines how notions of race, gender, and national identity colored quotidian colonial interactions. I argue that these interactions nuance the narrative of American empire and provide deeper understanding of the processes of colonization.Histor

Utah Visual Farm Guide: Year-round Soil Care

The Utah Visual Farm Guide uses a pictorial format to teach farming basics. This fact sheet illustrates soil management practices for each season

Utah Visual Farm Guide: What is Healthy Soil?

The Utah Visual Farm Guide uses a pictorial format to teach farming basics. This fact sheet illustrates the components of soil and the difference between healthy and unhealthy soils in Utah