FEDERAL PERSONAL INCOME TAX – SPRING 2011
LAW 647-002
Professor Benjamin Leff
SYLLABUS
Required Texts:
Casebook: Michael J. Graetz and Deborah Schenk, FEDERAL INCOME TAXATION:
PRINCIPLES AND POLICIES (Foundation Press 6th Edition).
Code and Regulations: Steven A. Bank and Kirk J. Stark, SELECTED SECTIONS:
FEDERAL INCOME TAX CODE AND REGULATIONS (Foundation Press 2010-11, but a
prior version will work).
Also, the entire tax code is available online at various sites, including
http://www4.cornell.edu/uscode/26; the regulations are available at
http://www.gpoaccess.gov/cfr/retrieve.html (Treasury Regulations are Title 26).
Recommended Text: Marvin A. Chirelstein, FEDERAL INCOME TAXATION (Foundation
Press 11th, but a prior version will work).
Classroom attendance/participation policy: Class meets Monday and Wednesday
between 9:00 and 10:50 A.M. in room 401. I urge all students to come to class
regularly having done the reading. Class attendance and participation are
mandatory. If a student’s grade on the final exam is on the borderline between
two grades, excellent attendance and preparation may result in an upward
adjustment.
Exam: The exam will be an in-class, open book, exam. Please confirm final exam time
and date before exam period.
Office Hours: Tuesdays 3:00 to 5:00 (or feel free to drop by or email for an
appointment). Office: 404. Email: bleff@wcl.american.edu.
Assignments Tentative: This syllabus is subject to change. Please note changes
announced in class or posted on the course website.
I.
INTRODUCTION TO FEDERAL INCOME TAXATION
a. Overview of class; overview of federal income taxation
CB 1-4, 12-27 (introduction, current taxes, terminology);
CB 71-74, 78-80, 85-88 (notes on administering the tax code)
II.
GROSS INCOME
a. Compensation for services
CB 28-41 (intro to income tax policy)
CB 96-103 (Old Colony Trust Co. v. Comm’r, U.S. 1929).
CB 130-133 (imputed income).
IRC §61
b. Special Cases
CB 133-139 (Gifts: Commissioner v. Duberstein, US 1960; notes
(A) and (B)); IRC §§ 102(a), 102(c), 274(b)
CB 142(H)-143; IRC §74(a) (Prizes and Awards)
CB 144(C); IRC §117(a)-(c)(1) (Scholarships and Fellowships)
Handout: Problem 1
c. Fringe Benefits -- §119, §132
CB 103-104 (“introductory note on fringe benefits”);
CB 120-129 (U.S. v. Gotcher, 5th Cir. 1968, and notes).
IRC §119
CB 111-118, stop before (C).
Handout: Comm’r v. Kowalski, 434 U.S. 77 (1977).
Handout: Turner v. Comm’r, Tax Court (1954)
Handout: Obama’s Mother-in-law
IRC §§132(a) through (e).
Skim Treas. Regs. §§1.132-2, 1.132-6 (Bank, Stark, CODE AND
REGS at 140-142; 581-583).
d. Constitutional Issues
Handout: Murphy v. IRS, DC Cir. 2006 and 2007
Handout: Constitution Art. I, §§2, cl. 3; §9, cl. 4; 16th Amendment
Handout: TBA (Healthcare Constitutionality)
IRC §104(a)(2).
e. Recovery of Capital and Basis
CB 145-151 (Notes on capital recovery and basis)
Handout: Problem 2 (Basis and Gain)
Handout: Raytheon v. Comm’r, 1st Cir. 1944
Handout: Garber v. United States, 5th Cir. 1979
IRC §§ 1001(a), 1012.
f. Realization
CB 154-166 (Note on realization requirement; Cesarini v. U.S.,
N.D. Oh 1969; Haverly v. U.S., 7th Cir. 1975; Eisner v. Macomber,
US 1920)
g. Illegal income, Discharge of Indebtedness
CB 179-187 (Collins v. Comm’r, 2d Cir. 1993)
CB 187-196 (Zarin v. Comm’r, TC 1989)
Handout: Kirby Lumber, US 1931
III.
DEDUCTIONS
a. Profit-Seeking Expenditures
CB 228-237 (Welch v. Helvering, US 1933; Gilliam v. Comm’r,
TC 1986);
Optional Handout: Tax Stories chapter on Welch v. Helvering
CB 237-245 through (D) (Exacto Springs v. Comm’r, 7th Cir.
1999)
Handout: Menard v. Comm’r, No. 08-2125 (7th Cir. 2009)
IRC §§162(a), 162(m)
b. Expenses Contrary to Public Policy
CB 246-251 through (F) (Comm’r v. Tellier, US 1966);
Handout: Tank Truck Rentals v. Comm’r, US 1958
Handout: Treas. Reg. §§ 1.162-1(a); 1.162-21(b)
IRC §162(f)
c. The Business/Personal Borderline: Lobbying, Clothes, Travel
Introduction: CB 252-254 (“lobbying”);
CB 258-266 through (C) (Pevsner v. Comm’r, 5th Cir. 1980)
CB 268-270 (to top of page)(“ travel expenses”);
CB 271-280 (travel and expenses while “away from home;”
Hantsis v. Comm’r, 1st Cir. 1981)
IRC §§162(e); 162(a)(2); 262
d. The Business/Personal Borderline: Meals, Gambling, Hobbies
CB 281-289 (Moss v. Comm’r, TC 1983; Section 274(n))
IRC §274(a), (e), (k), (n)
CB 376-383 (Plunkett v. Comm’r, TC 1984)
IRC §183
e. Personal Deductions: Personal Interest, Taxes, Casualty Losses
CB 421-423
CB 352-355, (personal interest) IRC §§163(h); 221
CB 431-433 stop before “Foreign tax credit” (taxes)
IRC §§164; 67(b)(2)
CB 383-388 (casualty losses) IRC §§165(c)(3); 165(h)
f. Personal Deductions: Medical Expenses, Charitable Contributions
CB 455-463 (medical expenses) IRC §213
CB 435-447 (charitable contributions) IRC §170, 501(c)(3)
Handout: TBA
g. The Business/Capital Expenditure Borderline
i. Introduction to Capital Expenditures:
CB 294-296(Tax Impact of the Capitalization Requirement);
CB 301-306 (through A) (Note on the Distinction Between
Deductible Expenses and Capital Expenditures; Woodward v.
Comm’r, US 1970);
IRC §§263(a), 263A(a)
ii. Education and Job Seeking Expenditures:
CB 314-315 (Note G); 327-328 (Rev. Rul. 75-120);
329-335 (Wassenar v. Comm’r, TC 1979 and notes)
Handout: Sharon v. Comm’r, TC 1976
IRC §§162, 212; Treas. Reg. 1.162-5(b)(3)
iii. Capital Recovery – Depreciation:
CB 336-339; 340-341; in 343-347, read (C)(D)(E)(H).
Handout: World Publishing v. Comm’r, 8th Cir. 1962
IRC §167(a), 168
iv. Business Interest:
CB 350-352; 360-364 (Knetch v. US, US 1960, and notes)
Handout: Tax Stories Chapter on Knetch
IRC §163(a)
v. Recovery of Business Losses:
CB 166-171 (Cottage Savings through (B)); CB 388-392 (through
(D)) (Fender v. US, 5th Cir. 1978)
IRC §1001(a)
IV.
CAPITAL GAINS AND LOSSES
a. Introduction: History and Rationale: CB 536-551
IRC §§1(h), 1001, 1011, 1012, 1016, 1211, 1212, 1221-1222
What is a Capital Asset: CB 551-565
b. What is a Capital Asset II: CB 571-585
c. What is Property: CB 595-614
Nonrecognition of Gain or Loss
Handout: Klein, Bankman, Shaviro at 224-233
Handout: Calif. Fed. Life Ins. Co. v. Comm’r, 680 F.2d 85 (9th Cir. 1982)
IRC §§ 1031, 1033, 121
V.
FAMILIES AND THE TAX CODE
a. Marriage: CB 464-476
IRC §§1(a)-(d), 2(b)
Handout: CCA 201021050 (California Domestic Partners)
Handout: Gill v. OPM (D. Mass. 2010)
b. CB 476-488 Divorce and Innocent Spouse
Handout: Banach v. Commissioner
§§71, 1041
Handout: Estate of Aylseworth v. Comm’r, 24 TC 134 (1955)
Handout: Porter v. Comm’r, 132 T.C. No. 11 (2009)
IRC §6015 (not in our book, find online)
c. Assignment of Income: CB 489-496; 497-504
Alternative Minimum Tax (AMT) CB 776-789
Handout: Bankman Example 82; Cameron Problem 244
d. Low-Income Taxpayers: CB 424-428
Handout: IRS Publication 596 (Earned Income Credit)
Handout: Shaviro, Effective Marginal Tax Rates
Handout: CBO Effective Tax Rates
IRC §32
VI.
TAX SHELTERS AND TAX LAWYER ETHICS
a. Tax Shelters CB 790-823
Handout: IRC §7701(o)
Handout: TBA
b. Tax Lawyer Ethics: CB 823-838
Handout: Tax Shelter Registration Memo
c. Final Day: TBA