Category: Tax


Embryo Exchanges and the Adoption Tax Credit

So, where are we?  We know what an embryo exchange is.  We know that Georgia has enacted a law (signed by Governor Perdue last week, effective July 1), the Option of Adoption Act, that permits, but does not require, the intended parents in an embryo exchange to obtain an order of parentage or adoption.  And we know that some people have claimed that, given the Georgia law, a federal adoption tax credit is available for expenses incurred in embryo exchanges.   But this claim is incorrect.  No federal adoption tax credit is available for such expenses.

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When’s Your Baby?

The tax code has plenty of perks for having kids.  (I’m not really supposed to give tax advice, but I should say that notwithstanding the $1000 per child tax credit, and the additional per-child dependent exemption, and, if your income is low enough, an increased earned-income tax credit, as well as various other child-related tax benefits, having children will be a net financial loss.)

Very bad tax shelter.

Very bad tax shelter.

But when do you get these tax advantages?  When do you have kids?  (No, not like that–have kids whenever it works for you–why are you asking me?)  I mean, is a child an individual for tax purposes only when he is born, or are yet-to-be-born children also individuals for tax purposes?  As I’ll discuss in a later post, this question matters for figuring out whether a federal adoption tax credit is available for embryo exchanges, because the federal adoption tax credit is available only for the adoption of an “eligible child,” and an eligible child is defined as an “individual” who meets certain requirements.  So we will need to figure out whether an embryo counts as an individual for these purposes.

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Hey, Tax Code, You Stay Boring!

Being a tax professor often involves questions like whether a pre-transaction redemption should be taken into account when determining whether substantially all assets have been transferred so that the transaction can qualify as a C reorganization. The bottom line about these questions is: nobody cares. I mean, your client might care, and if you’re taking a corporate tax exam, your professor might care, but probably your mom doesn’t care (unless she’s a tax dork too, in which case, lucky you!).

But the tax code can be used not only to raise revenue, but also to provide incentives or disincentives for various activities and to express views and values. So in addition to the many important but sometimes obscure or technical questions always present in tax law, difficult moral issues–“hot” issues about which lots of people have immediate, strong views–can also get mixed up with tax.

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“Been There, Done That” or “Reflections on the Estate Tax”

I read somewhere that certain magazines publish the same article about once every eighteen months. The text is never identical and there might be a new twist, but it’s pretty much the same old fare. (Think Modern Bride with the headline Pale Ivory This Year’s Color for Summer Brides.) And you really can’t even fault the magazines. Really, what is there to say about a wedding that hasn’t been said already?

This is how I’ve come to feel about the estate tax over the course of the last couple of weeks. The tax is back in the news because President Obama’s proposed budget announced that he would retain the tax with its current rate and exemption levels, rather than allowing the tax to expire in 2010. The House voted to retain the 2009 version of the tax, but the Senate has voted to lower the top rate from 45 to 35 percent and to increase the exemption from $3.5 million to $5 million (and thus from $7 million per couple to $10 million per couple).

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Who Are the “Moneyed Elite”?

hand of gold.jpgInspired by Frank’s post, one wonders who, exactly, are the “moneyed elite” in the United States?

Andrew Sullivan uses the term suggesting a reference to people whose annual incomes run to multi-millions of dollars and whose net worth is accordingly in excess of some $10 million or so.

Another reference appears to the new book Richistan, where the threshold of even the least among the moneyed elite seems to contemplate a net worth of least $1 million (ranging up to $10 million). Annual income is unspecified but supposes average home values of $810,000 which implies incomes of some small multiple of that, certainly exceeding $1 million.

If these are the right parameters to think of the “moneyed elite,” then one wonders about cheering President Obama’s reported tax plan. It reportedly targets tax increases, and reduced tax deductions and credits, at individuals whose annual income is $100,000 (no tax credit) or $125,000 (highest tax rate and least deductions).

Are these really the “moneyed elite” in this country? To be sure, President Bush and Congress ran up an extraordinary deficit the past several years (the figure $1 trillion is heard); President Obama and Congress just passed a nearly $1 trillion stimulus package; and the President and his Treasury Department, with Congressional support, are sustaining the commitment, running to nearly another $1 trillion, to rescue the financial system.

Somebody has to pay for all this. But is it fair to say that imposing higher taxes on people whose incomes are $100,000, $125,000 or even $250,000 (the figure President Obama used in his speech Tuesday night), putting the burden on “the moneyed elite”? It is doubtful that such earners had anywhere near a net worth of $1 million even at the height of the market last year; with the plummeting of asset values since September, moneyed elite, or even affluent, as the New York Times puts it, may not be the best way to describe their financial condition.


Audit them all

Tom Daschle, former Senator and nominee for Secretary of Health and Human Services, didn’t fully pay his taxes. Apparently, Daschle didn’t tell his accountant about a free car service (worth a whopping $250,000) and consulting income (another $88,000) over a three year period. Tax laws are complex and so perhaps Daschle didn’t realize at the time that these things constituted taxable income. Regardless, the perception Daschle leaves is that powerful people don’t pay everything they owe.

In the world of tax compliance, perceptions matter a good deal.

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Tim Geithner and Tom Daschle Are No-Goodniks

I have enjoyed my visit at Concurring Opinions, but alas, my time is up and this will probably be my last (and maybe least) post.

I am one of those who is irked by the Timothy Geithner and now the Tom Daschle tax controversies. Geithner avoided paying tens of thousands of dollars in self-employment taxes. Then he paid back the part that he was forced to. Then, when his nomination as Treasury Secretary loomed, he paid the rest of it. And he wasn’t straightforward about his reasoning for the timing of all of this. Wags took the opportunity to argue that we need to reform the tax code, to make it simple enough that even the Treasury Secretary can follow it. Geithner was confirmed, apparently because none of the candidates who paid their taxes correctly were good enough for the job.

Now, Tom Daschle is facing similar issues. Nominated for Secretary of Health and Human Services, he amended his last three years’ worth of tax returns. Upon further reflection, he realized that he had failed to report hundreds of thousands of dollars in income, and that he shouldn’t have claimed some of the deductions that he took. He wrote a check for $140,000 and is now hoping for the best. It apparently wasn’t very challenging to get it right the second time around; why couldn’t he have had his “people” be equally careful in the first place? The most obvious reason is that nobody was watching then.

I agree with the idea that you can gauge how ethical someone is by how they behave when they think nobody is watching. Given the difference between how Geithner and Daschle behaved before and after people were watching, I think that they both fail the test.

I’m in a self-righteous mood about this right now, because I am doing my taxes this week and I found some old mistakes.

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Why the Persistence of Tax Havens?

isleofMan.jpgThe last remnants of British imperialism are still wreaking havoc today. The Canadian Governor-General’s bizarre proroguing of the Parliament there threatens to make a figurehead a kingmaker. More dangerously, tax havens like the Isle of Man, Guernsey, and Jersey cost governments worldwide billions of dollars of revenue annually:

Because of the secrecy surrounding the treasure islands, no one knows how much money they divert from developing countries. Christian Aid’s estimate – of $160 billion a year – is the lowest figure, though 60% greater than the international aid the poor world receives. The Pope suggests $255bn; the US research group Global Financial Integrity proposes $900bn. In all cases we’re talking about the means by which hundreds of thousands of lives could have been preserved in the world’s poorest countries. But Britain’s network of tax havens permits multinational companies, dodgy businessmen and corrupt leaders to snatch money from [tax authorities].

As governments face ever-greater fiscal responsibilities in the midst of crisis, many of those best able to shoulder the burden are AWOL. Even though “organised crime . . . depends on tax havens,” they persist. Why?

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