Quantitative Model for Measuring Line-Drawing Inequity
The law draws lines. It draws lines between manslaughter and murder, negligence and gross negligence, speeding and driving legally, and capital gains and ordinary income. Those lines invariably cause undesirable results. In particular, lines in the law cause inequity because they impose different treatment on similarly-situated persons. Despite line-drawing’s inequity, analysts generally shun inequity and embrace the quantitative comforts of inefficiency analysis. This Article introduces a quantitative model for measuring inequity, so the preference for quantitative measures no longer justifies the disdain for inequity analysis. Instead, democratic and philosophical ideals should make now-quantifiable inequity analyses the analytical tool of choice.The quantitative model introduces a robust method for measuring line-drawing inequity. The quantitative information it provides illustrates that the location of a line affects the amount of inequity line-drawing causes. The model provides an opportunity to test and rethink the relationship between equity and efficiency. It demonstrates that the governed may reduce line-drawing inequity by altering their behavior to avoid negative line-drawing effects. The model also provides quantitative evidence that the perceived tension between equity and efficiency analyses is misinformed. In fact, the model shows that efficiency and equity may correlate in the line-drawing context. Finally, the Article illustrates that the criteria used to draw a line may result in the inappropriate orientation of the line. The Article concludes that excessive inequity may signal a need to change the orientation of a line or otherwise alter the law to reduce line-drawing inequity.
The Federal Definition of Tax Partnership
The federal definition of tax partnership determines who will be subject to partnership tax law and thereby significantly impacts many taxpayers' tax liability. Despite this, the definition remains uncertain. This Article posits that the uncertainty flows from an uncoordinated effort to define tax partnership in the absence of tax policy considerations. Partnership tax policy first disregards partnerships for tax purposes. Only when partnership tax accounting and reporting become complex and tax administration becomes inconvenient does Congress impose partnership tax rules. Although the definition of tax partnership should consider this, Congress has not explicitly defined tax partnership. Furthermore, courts, Treasury, and the IRS generally have not considered the purposes of partnership tax law in the more than 150 instances they have interpreted and applied the definition of tax partnership. As a result, those efforts have produced ten separate tests for defining tax partnership, perpetuating the definition's uncertainty. This Article identifies and evaluates each of those tests and recommends abandoning tests that do not incorporate the purposes of partnership tax law and consolidating the remaining tests. Based on that consolidation, the Article proposes a new definition of tax partnership. The proposed definition incorporates the purposes of partnership tax law, and, because partnership tax law was intended to govern substantive-law partnerships, it includes some aspects of the substantive-law definition. Nonetheless, by using tax-specific terminology and relying on the purposes of partnership tax law, the proposal clarifies the definition of tax partnership and moves away from the substantive-law definition.
Proposal to Reform the Like Kind and Involuntary Conversion Rules In Light of Fundamental Tax Policies: A Simpler, More Rational and More Unified Approach
Almost from the beginning of the federal income tax, the law has contained two nonrecognition provisions that have undergone relatively little change: the like kind rule and the involuntary conversion rule. Commentators have questioned the policy grounds for the like kind rule in general, and for some of its particular features, such as the exchange requirement. Congress and its staffers have also noted the complexity caused by certain aspects of the rule and have enacted or proposed remedial changes in this regard. The involuntary conversion rule also contributes to the complexity of the tax system given the fact-intensive analysis that it requires. Perhaps more fundamentally, the two nonrecognition rules generally use different standards for determining eligible replacement property, an apparent inconsistency that occasionally catches the attention of both Congress and commentators. This article seeks to improve the like kind and involuntary conversion rules, that is, make the provisions more rational and less complex, by analyzing them in light of the fundamental tax policies of efficiency, equity, and administrability. The product of this effort is a simpler, more rational and more unified approach for granting nonrecognition treatment to voluntary and involuntary dispositions of property. The article's recommendations include (i) the use of the like kind standard to determine eligible replacement property under both the like kind and involuntary conversion rules, along with narrowing the like kind standard for real property by employing a categorization approach modeled on the real property classifications used for depreciation purposes; (ii) the use of an express rollover mechanism under the like kind rule; and (iii) the use of a single, rather than bifurcated, period for replacing assets under the like kind rule.