FEDERAL PERSONAL INCOME TAX – SPRING 2012
LAW 647-002
Professor Benjamin Leff
SYLLABUS
Required Texts :
Casebook (“CB”) : Michael J. Graetz and Deborah Schenk, F
EDERAL
I
NCOME
T
AXATION
: P
RINCIPLES AND
P
OLICIES
(Foundation Press 6 th
Edition).
Code and Regulations : Steven A. Bank and Kirk J. Stark, S
ELECTED
S
ECTIONS
:
F
EDERAL
I
NCOME
T
AX
C
ODE AND
R
EGULATIONS
(Foundation Press 2011-12, 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, F
EDERAL
I
NCOME
T
AXATION
(Foundation
Press 11 th
, but a prior version will work).
Classroom attendance/participation policy: Class meets Tuesday and Thursday between 1:30 and 3:20 PM in room ______. 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 a three-hour, in-class, open book, closed internet, exam. The exam will be held on_____________________________.
Office Hours: Wednesdays 2:00 to 4:00 (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.
1 v.1 (1/4/12)

2
I
NTRODUCTION TO
F
EDERAL
I
NCOME
T
AXATION
I.
1.
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.
G ROSS I NCOME
2.
Compensation for services
CB 28-41 (intro to income tax policy)
CB 96-102 (Old Colony Trust Co. v. Comm’r, U.S. 1929).
CB 130-133 (barter income v. imputed income).
IRC §61
3.
Special Cases (Gifts, Prizes and Awards, Scholarships)
CB 133-139 (Comm’r v. Duberstein, US 1960; notes (A), (B));
IRC §§ 102(a), 102(c), 274(b)
CB 142(H)-143; IRC §74(a)
CB 144(C); IRC §117(a)-(c)(1)
Handout: Problem 1 Gifts
4.
Fringe Benefits – Common law and §119
CB 103-104 (“introductory note on fringe benefits”);
CB 120-129 (U.S. v. Gotcher, 5
IRC §119 th
Cir. 1968, and notes);
CB 111-118, stop before (C).
Handout: Comm’r v. Kowalski, 434 U.S. 77 (1977).
5.
Fringe Benefits II -- §132
Handout: Obama’s Mother-in-law
IRC §§132(a) through (e).
Skim Treas. Regs. §§1.132-2, 1.132-6.
6.
Constitutional Issues
Handout: Constitution Art. I, §§2, cl. 3; §9, cl. 4; 16 th Amendment
Handout: Fla. V. HHS , (11 th
Cir. 8/12/2011)
Handout: The Health Insurance Mandate , Tax Notes Today (2010)
IRC §104(a)(2).
7.
Recovery of Capital and Basis
CB 145-151 (Notes on capital recovery and basis)
Handout: Problem 2 (Basis and Gain)
Handout: Garber v. United States, 5 th
Cir. 1979
IRC §§ 1001(a), 1012. v.1 (1/4/12)

8.
Realization
CB 154-166 (Note on realization; Cesarini v. U.S., N.D. Oh 1969;
Haverly v. U.S., 7 th Cir. 1975; Eisner v. Macomber, US 1920)
9.
Illegal income, Discharge of Indebtedness
Handout: Review of Realization
CB 179-187 (Collins v. Comm’r, 2d Cir. 1993)
CB 187-196 (Zarin v. Comm’r, TC 1989)
Handout: TBA
III.
D
EDUCTIONS
10.
Profit-Seeking Expenditures
CB 228-237 (Welch v. Helvering, US 1933; Gilliam v. Comm’r,
TC 1986);
CB 237-245 through (D)(Exacto Springs v. Comm’r, 7 th Cir. 1999)
Handout: Menard v. Comm’r, No. 08-2125 (7 th
IRC §§62(a)(1), 162(a), 162(m)
Cir. 2009)
11.
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)
12.
The Business/Personal Borderline: Lobbying, Clothes, Travel
Introduction: CB 252-254 (“lobbying”);
CB 258-266 through (C) (Pevsner v. Comm’r, 5 th
Cir. 1980)
CB 268-270 (to top of page)(“ travel expenses”);
CB 271-280 (through (F)) (Hantsis . Comm’r, 1 st
IRC §§162(e); 162(a)(2); 262
Cir. 1981)
13.
The Business/Personal Borderline: Meals, Gambling, Hobbies
CB 281-289 (Moss v. Comm’r, TC 1983; Section 274(n))
CB 289-294 IRC §280A(a) and (c)(1).
IRC §274(a), (e), (k), (n)
CB 376-383 (Plunkett v. Comm’r, TC 1984)
IRC §183
14.
Personal Deductions: Personal Interest, Taxes,
CB 421-423 (§§62(a)(skim), 63(a) and (b))
CB 352-355, (home mortgage interest) IRC §§163(h);
(student loan interest) §221
CB 431-433 stop before “Foreign tax credit” (taxes) §164
CB 255-258 (employee business expenses) IRC §§212, 67
Handout: Hamper (TC 2011)(misc. itemized deductions)
3 v.1 (1/4/12)

15.
Personal Deductions: Casualty Losses, Medical Expenses,
Charitable Contributions
CB 383-388 (casualty losses) IRC §§165(c)(3); 165(h)
CB 455-463 (medical expenses) IRC §213
CB 435-447 (charitable contributions) IRC §170, 501(c)(3)
[Midterm Evaluations]
IV.
T
HE
B
USINESS
/C
APITAL
E
XPENDITURE
B
ORDERLINE
16.
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)
Problem: Capital Recovery Problem
17.
Capital Recovery – Depreciation:
CB 336-339; 340-341; in 343-347, read (C)(D)(E)(H).
Handout: Broz v. Comm’r, 137 TC No. 3 (2011)
IRC §167(a), 168
[Spring Break – No Class March 13 th and 15 th ]
V.
P
OTENTIAL
A
BUSE
18.
Tax Crimes and Controversy
Guest Lecturer – [Reading TBA]
[Class Cancelled March 22 – Makeup on date to be selected]
19.
Economic Substance Doctrine:
CB 350-352; 360-364 (Knetch v. US, US 1960, and notes)
CB 166-171 (Cottage Savings through (B));
CB 388-392 (through (D)) (Fender v. US, 5th Cir. 1978)
IRC §§267(a)(1) and (b)(2); 1091(a)
20.
Corporate Tax Shelters:
CB 790-818
IRC §7701(o)
Handout: IRS Notice 2010-62
VI.
C
APITAL
G
AINS AND
L
OSSES
21.
Introduction: History and Rationale: CB 536-551
IRC §§1(h)(1), 1001, 1012, 1211(b), 1212(b), 1221(a)(1)
What is a Capital Asset I: CB 551-565
4 v.1 (1/4/12)

22.
What is a Capital Asset II: CB 571-584
23.
Nonrecognition of Gain or Loss: CB 644-646
Handout: Klein, Bankman, Shaviro at 224-231
Handout: Cal. Fed. Life Ins. v. Comm’r , 680 F.2d 85 (9 th
IRC §§ 1031, 121, Treas. Reg. 1.1031(a)-1(b), (c)
Cir. 1982)
VII.
F
AMILIES AND THE
T
AX
C
ODE
24.
Marriage: CB 464-474
Handout: CCA 201021050 (California Domestic Partners)
Handout: Gill v. OPM (D. Mass. 2010)
IRC §§1(a)-(d), 2(b)
25.
Divorce and Innocent Spouse
CB 476-484
Handout: Banach v. Commissioner
Handout:
Estate of Aylseworth v. Comm’r
, 24 TC 134 (1955)
Handout:
Porter v. Comm’r
, 132 T.C. No. 11 (2009)
§§71, 1041, 7703(a)(1)
26.
Assignment of Income/ Alternative Minimum Tax (AMT):
CB 489-496
CB 776-789
27.
Low-Income Taxpayers : CB 424-428
Handout: IRS Publication 596 (Earned Income Credit)( just skim!
)
Handout: Shaviro, Effective Marginal Tax Rates
Handout: CBO Effective Tax Rates
Handout: Taxing Families Data Sheet
IRC §§32, 151, 24
VIII.
T AX L AWYER E THICS
28.
Tax Lawyer Ethics : CB 823-838
Handout: Tax Shelter Registration Memo
5 v.1 (1/4/12)