This book embraces the transactional attorney’s analytical process. The book presents a single fact pattern that it uses throughout the book. The fact pattern may appear relatively simple, but it is filled with nuances and provides an opportunity to do sophisticated tax planning. The book helps students begin asking the appropriate questions and considering the relevant issues by posing a few questions at the beginning of each chapter. The questions are often more general than questions found in typical tax law casebooks. Nonetheless, a proper analysis of most questions requires detailed knowledge of the relevant law and results in detailed answers to the questions. The boundary of the questions may not always appear to be clear and some questions may appear to overlap. The nature of the questions is intuitional. They present general ideas that students use to get started in the analysis and develop skills through application that will help them identify issues in a nebulous practice environment that most tax planners face.

To replicate the research process, each chapter of the book provides commentary that could be similar to (but perhaps less detailed than) material typically found in a treatise, article, or other secondary source of legal authority. The commentary introduces ideas and legal concepts that apply to the questions and directs the reader to relevant primary legal authority. Ultimately, the students must carefully study, interpret, and apply relevant law to the issues raised by the questions. The commentary cites legal sources in the footnotes. The chapters reproduce relevant case law and rulings, but students will have to access the cited tax statutes and regulations in sources outside this book. The knowledge students will need to properly approach the material is largely contained in the law. In fact, students generally will not be able to fully understand and answer the questions until they have carefully studied the relevant law.

This Article reviews the evolution of the corporate formation rules governing contributions of self-created notes. It discovers that Congress did not intend to impose taxable gain on shareholders who contribute self-created notes. It also reveals how the court in Peracchi reached the right conclusions (from an economic and corporate-tax-policy perspective) using the wrong analytical framework. After assessing current theories of Peracchi, the Article presents the liability-offset theory. Under this theory, the contributed self-created note would offset the liabilities assumed by the corporation in a manner similar that used in section 357(d). The Article illustrates that this theory adheres to general principles of income tax, honors concepts of corporate income tax, and recognizes the economic realities of corporate formation and contributions to corporations. The theory could therefore help resolve problems that stem from Peracchi and its progenitors.

The Article attributes the concept’s allure and illusion to path dependency and tax myopia—partnership tax experts expend considerable effort mastering difficult rules, which they cling to, and they focus narrowly on the tax aspects of those rules. The Article introduces three correlatives to end the myopia and improve the tax allocation rules: (1) economic items and tax items; (2) state law and tax law; and (3) economic interests and partners’ interests in a partnership. The Article illustrates that aspects of the current rules are tax-centric (i.e., economic results follow tax allocations) and illusory. The rules’ tax-centricity may create unintended legal consequences for unsuspecting partners; their illusion creates opportunities for tax abuse. After illustrating the current rules’ shortcomings, the Article recommends fundamental reform of the partnership tax allocation rules. It recommends a move to item-specific economic-centric rules that will eliminate the unintended legal and economic consequences of the current rules and curb tax abuse.