The Oxford Introductions to U.S. Law - Income Tax Law - Edward McCaffery.pdf

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In The Oxford Introductions to U.S. Law: Income Tax Law, Edward McCaffery presents an accessible introduction to the major topics in the field of federal income taxation, such as income, deductions, and recognition of gains and losses. After discussing central rules and doctrines individually, Edward McCaffery offers a very sophisticated yet clear explanation of the interplay among them, carefully describing how they work together to carry out the policy goals of the U.S. tax system. Professor McCaffery describes, for example, how the current income tax in the United States has increasingly become a wage tax that favors those with capital rather than those whose money comes from labor. In explaining the consequences of tax policy on individuals, he also considers important possible alternatives for income taxation in the U.S. The Oxford Introductions to U.S. Law: Income Tax Law sets forth the 'who,' 'what,' 'when,' and 'why' of income tax law and describes the essential concepts of the field in a clear and concise manner that helps students and non-experts increase their understanding of the policies behind modern tax law and the ways in which these policies affect different types of individuals. Introduction PART I A Taste of Theory CHAPTER 1 A View of the Forest 1.1 The Basic Logic of Tax 1.2 Three Kinds of Tax 1.3 An Income Tax 1.4 Two Kinds of Consumption Taxes 1.5 A Common View: The Income Tax as a “Hybrid” 1.6 The Real Story: The Income Tax as a Wage Tax 1.6.1 Tax Planning 101 1.6.2 Beyond Tax Planning 101 1.6.3 The Income Tax, Take Two: Ad Hoc Deviations 1.7 Tax Rates 1.8 Following the Tax Form 1.9 The Goals of Tax Planning 1.10 The Capital-Labor Divide, Redux 1.11 Summary PART II The Details CHAPTER 2 The “What” of Taxation, Part One: Inclusions in the Tax Base 2.1 Three Definitions of Income 2.1.1 Constitutional and Statutory Definitions 2.1.2 Judicial Definitions 2.1.3 Academic Definitions 2.2 Macomber and Why It Matters 2.2.1 Tax versus Economics 2.2.2 On Basis and “Tax Time Bombs” 2.2.3 Rule: Sooner or Later, Part I: Tax Time Bombs Go Off 2.3 Four Conceptual Items of Non Income 2.3.1 Psychic Income 2.3.2 Imputed Income 2.3.3 Unrealized Income 2.3.4 Borrowing 2.4 Tax Planning 101 2.4.1 Note: Tax Planning 102 2.5 Statutory Exclusions 2.6 Gifts 2.6.1 Definitions 2.6.2 Gifts of Appreciated Property 2.7 Beyond Cash 2.7.1 An Important Example 2.7.2 Valuation Principles 2.8 “Fringe” or Noncash Benefits 2.8.1 Exclusions Matter 2.8.2 Plugging Up the Leaks 2.9 Other Oddities 2.10 Debt and Its Discharge 2.11 A Small Taste of Theory 2.12 Other Taxes 2.13 Summary CHAPTER 3 The “What” of Taxation, Part Two: Deductions from the Tax Base 3.1 General Principles 3.2 The Mechanics of Deductions 3.2.1 The Math of the Matter 3.2.2 Following the Form (Again) 3.2.3 An Important Case Study: The Earned Income Tax Credit 3.3 Personal Expenditures 3.3.1 Note on Standard Deduction and Personal Dependency Exemptions 3.3.2 Note on “Phase-outs” and Itemized Deductions 3.4 Business Expenditures (With Notes on Timing) 3.4.1 Rule: Sooner or Later, Part II: You Get Your (Business or Investment) Basis Back 3.4.2 Question One: Now or Later (Ordinary or Capital)? 3.4.3 Question Two: If Later, Does the Deduction Come over Time or “Way Later”? 3.4.4 Tracking Basis 3.5 Business-Personal Expenditures 3.5.1 Two Senses of Mixed Matters 3.5.2 A Note on Using the Wrong Tools 3.6 The Tripartite Distinction in Action: Interest Deduction Rules 3.6.1 Losses 3.6.2 A Quick Note on Gambling Losses 3.7 A Note on the AMT 3.8 Summary CHAPTER 4 The “When” of Taxation: Timing with a Capital and Lowercase T 4.1 Realization, Vel Non 4.1.1 A Note on Valuation 4.1.2 Looking at Both Sides 4.1.3 Strange Bedfellows, and a Note on Losses 4.1.4 A Note on Nothing 4.2 Recognition, Vel Non 4.2.1 Note on Davis, Section 1041, and Divorce 4.3 A Case Study: Starker and Like-Kind Exchanges, with a Note on Boot 4.4 Small t Timing: Matters of Accounting 4.5 Methods of Accounting, Including Installment Sales and Inventory 4.6 Constructive Receipt, Cash Equivalence, Economic Benefit 4.7 Annual Accounting Rule 4.8 Claim of Right and Tax Benefit Rules 4.9 Note on Depreciation and Capitalization 4.10 Summary CHAPTER 5 The “Who” of Taxation: Questions of Attribution and the Appropriate Filing Unit 5.1 General Themes 5.2 Husbands and Wives (With Some Historical Notes) 5.2.1 Marriage Penalties, Bonuses . . . and the Real Issue 5.2.2 Note on Head of Household Status 5.2.3 Note on Marriage for Federal Income Tax Purposes 5.3 Kids 5.4 Fruits and Trees 5.4.1 A Note on Economics 5.5 Note on Divorce 5.6 A Statutory Response: The “Kiddie Tax” 5.7 Shifting To and Through Entities 5.7.1 Note on Shifting to a Later Self 5.8 Summary CHAPTER 6 The “How Much” of Taxation: Characterization of Ordinary Income and Capital Gains 6.1 The Math of the Matter: A Question of Rates 6.2 The Policy (If Any) of It All 6.3 Statutory Scheme 6.4 Two Big Examples of Section 1221(1): Real Estate and Securities 6.5 Playing with Definitions: Corn Products and Arkansas Best 6.5.1 A Further Note on Capital Property 6.6 Anticipatory Income, or Fruits and Trees, Again 6.7 A Modern Day Issue: Carried Interest 6.8 Summary CHAPTER 7 A Summary, of Sorts: Anatomy of a Tax Shelter 7.1 General Strategy of Tax Shelters 7.2 Some Quick and Dirty Examples 7.3 Crane, Tufts , the Role of Debt, and a Deeper Look 7.3.1 A Quick Look to Hollywood 7.4 What the Tax Reform Act of 1986 Did, and Did Not Do 7.4.1 What the Law Did 7.4.2 What the Law Did Not Do 7.5 Common Law and Judicial Doctrines 7.6 Ethics 7.7 Summary PART III Whither Tax? CHAPTER 8 The Once and Future Tax System 8.1 The Lay of the Land 8.2 Incremental Reform 8.3 More Taxes? 8.4 Comprehensive Reform: A Better Direction 8.5 A New View: Three Types of Tax 8.5.1 A New Look at Savings 8.5.2 Putting It All Together: Three Bases, Three Types of Savings 8.6 The Case for a Progressive Spending Tax 8.6.1 The Progressive Spending Tax and Tax Planning 101 8.6.2 The New Achilles’ Heel 8.7 Summary Appendix Table of Cases Glossary of Key Terms Notes for Further Reading Index