What Corporate Tax Shelters Can Teach Us About the Structure of Subchapter C

Coven argues that the rules extending nonrecognition treatment to the incorporation of property never have been properly integrated with the double taxation of corporations. As a result, the duplicate burden or benefit is applied retroactively. That defect, Coven believes, has been long overlooked, but now that it has been exploited by one popular version of the loss replicating corporate tax shelter, it must be addressed. The remedy applied by Congress to the tax shelter in section 358(h) is insufficient, does not operate correctly and undermines the integrity of the code, he says. This article proposes a more comprehensive solution that would improve the code by eliminating both the benefits and the burdens of the retroactive double tax through dual basis adjustments similar to those used in partnership taxation. The article was prepared before the adoption of section 362(e)(2). That provision, however, merely underscores the need for the solution suggested here, Coven concludes

Who Should be Entitled to Claim the New Education Credits?

Professor Coven believes that the education assistance provisions enacted in 1997, while long overdue, were ill-considered and poorly constructed. Focusing on what should have been the simple question of who is entitled to claim an education tax credit, this report illustrates the harm that inadequate drafting produces. While section 25A appeared to deny a credit to a dependent child, an unfair and unwise result, the proposed regulations allow parents to shift the credit to their children but only on the forfeiture of the deduction for the personal exemption. That rule, says Coven, imposes a harsh penalty on low and middle-income taxpayers but no penalty at all on high-income taxpayers. Neither result is consistent with the overall aim of the education credits. This report is an excerpt from a broader study of the drafting deficiencies in the educational assistance provisions currently being undertaken by the author. Because of the poor quality of these sections, considerable corrective legislation will be required to fulfill the promise of the 1997 legislation

Who Should be Entitled to Claim the New Education Credits?

Professor Coven believes that the education assistance provisions enacted in 1997, while long overdue, were ill-considered and poorly constructed. Focusing on what should have been the simple question of who is entitled to claim an education tax credit, this report illustrates the harm that inadequate drafting produces. While section 25A appeared to deny a credit to a dependent child, an unfair and unwise result, the proposed regulations allow parents to shift the credit to their children but only on the forfeiture of the deduction for the personal exemption. That rule, says Coven, imposes a harsh penalty on low and middle-income taxpayers but no penalty at all on high-income taxpayers. Neither result is consistent with the overall aim of the education credits. This report is an excerpt from a broader study of the drafting deficiencies in the educational assistance provisions currently being undertaken by the author. Because of the poor quality of these sections, considerable corrective legislation will be required to fulfill the promise of the 1997 legislation

Basis Shifting - A Radical Approach to an Intractable Problem

Coven asserts that one of the lingering ambiguities in subchapter C is how an appropriate tax benefit can be obtained from the tax basis that disappears when a shareholder\u27s interest is completely redeemed but the transaction is treated as a dividend because stock held by others is attributed to the former shareholder. He believes that Treasury was content to rely on manifestly inadequate regulations to resolve that issue until taxpayers discovered how to convert those regulations into a potent tax shelter. The amendment to those regulations, proposed in 2002, however, was fatally flawed, according to Coven. In this article, Coven proposes a novel solution to the disappearing basis problem that would preserve existing law for most individual taxpayers while preventing the trafficking in basis used in tax sheltering. Because the proposal relies on fundamental tax rules for its result, it renders the amendment of the regulations unnecessary