In my recently published book, The Supreme Court, Federal Taxation and the Constitution, I review several constitutional issues that could impact the coming consideration of broad scale tax reform in Congress. It is likely that Congress will be more attentive to possible constitutional issues than it was when it enacted the health care tax provisions in 2010. The failure to clearly label that tax as a tax fueled multiple lawsuits against the tax that ultimately had to be decided by the Supreme Court in a surprising split decision in which Chief Justice Roberts wound up siding with the supporters of the tax.

Read More

ILM 201123027 gives a big win to an air carrier and rules that for purposes of the federal excise tax on transportation of property by air (section 4271) the Carrier is the member of a corporate group that actually operates the planes, and the taxpayer is the sister corporation called Organizer that legally contracts with the Carrier to deliver the property that is accepted for transport by a third affiliate, the Retailer (owned by Organizer).

Read More

ILM 201121020 (April 27, 2011) is advice from LB&I area counsel to the field on the audit of the return of a corporation. The memo is heavily redacted and the facts are confused. The issue is whether the conveyance of rights to commercialize a patented device in a foreign country is the sale of a capital asset producing capital gain that can be reported on the installment method; the IRS's answer is no, it is the franchise of a right to sell a produce in a geographical area, which section 1253 directs shall produce ordinary income. The approach of the ILM is not new; it is essentially the same as an earlier LMSB memo number 20075201F. However, its reasoning evidences a lack of confidence in the IRS position.

Read More