Moore v. United States: Joe Biden Thinks He Can Tax Gains in the Value of Your House When You Have Not Yet Sold It

The Biden Solicitor General's office and Justice Ketanji Brown Jackson think that cases under the Taxation Clause or the 16th amendment are political questions.

This week the Supreme Court decided its biggest tax case of the last generation, Moore v. United States, so narrowly that it wrote a ticket that is good for the Moores' train only and not for almost any future trains.

The big news that I glean from reading the opinions in Moore v. United States is that both Biden Supreme Court appointee, Justice Ketanji Brown Jackson and Joe Biden himself, though his Justice Department, think that Congress has limitless power to tax unrealized capital gains or to enact a wealth tax on your net worth. Justice Jackson concluded her opinion by saying essentially that all questions concerning the Tax Clause of Article I, Section 8 or the scope of the 16th Amendment are political questions that are not reviewable by the federal courts.

This means that the government could tax increases in the value of your house or apartment; in your IRA retirement savings account; or in any other stocks that you happen to own even without you selling any of those items. Until this week, no prior Supreme Court Justice has, to my knowledge, taken any position as radical as Justice Jackson's view that all cases that arise under the Taxation Clause or the Sixteenth Amendment always raise a political question.

Former President Trump should confront President Biden on this in their upcoming debate. President Biden is saying that he expects the winner of 2024 presidential election to make two appointments to the Supreme Court. Two more Supreme Court appointees like Justice Jackson would be a mistake.

Comments

[Noscitur a sociis]

Former President Trump should confront President Biden on this in their upcoming debate.

I feel pretty comfortable predicting that’s not going to happen.

[Mr. Bumble]

I thought the "moderators" were posing the questions.

[LoganMankins]

You can tell Calabresi is suffering from early onset dementia, without going into depth his sloppy writing which is a sign itself, when he actually thinks this inane issue is a winner for Trump when his base only cares about are Jan. 6 “hostages” and the border.

[Joe_dallas]

The 16th only removed the limitation on income tax from the apportionment requirement. The limitation of apportionment remained intact for direct taxes.

Read Thomas' dissent

[Malika the Maiz]

The federal income tax isn't a direct tax?

[y81]

It is. (Or at least the Supreme Court said it was.) Hence the 16th Amendment.

[Malika the Maiz]

Then this comment "The limitation of apportionment remained intact for direct taxes" doesn't seem right, no?

[JoeFromtheBronx]

Supreme Court justices split on that question.

[Dr. Ed 2]

The 16th Amendment says "The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration."[emphasis added]

That means that the apportionment clause does not apply to a tax on INCOMES -- but that it still does on a tax based on anything else.

But reality here is that 40 years of Reaganomics is coming home to roost -- retirees are entering retirement either rich or poor -- either with a six figure net worth or a six dollar net worth -- and net worth is going to have to be taxed somehow. Possibly through inflation, but this wealth is going to be captured somehow to provide for the half that doesn't have it.

People were warning about this 40 years ago -- that you need to have a prosperous middle class to defend the prosperity of the rich, and once the Reagan divide started between the "haves" and "have nots", it would only end in a mass confiscation.

[Davy C]

Six figure net worth is your cutoff for "rich"? You want to tax a retiree with a half-paid-for house?

[Clayton Cramer]

A fast way to get lefties boomers to vote against Democrats and to see the rest of us turn investments into cash or leave America.

[Brett Bellmore]

"and net worth is going to have to be taxed somehow."

This line could probably serve as a dictionary example of "begging the question". WHY does net worth have to be taxed somehow?

[Dr. Ed 2]

Because we have bills that have to be paid.

[CountmontyC]

Maybe cut spending instead? It's what I do when my expenses start to outpace my income.

[Frank Drackman]

You speak the truth. To the Oven with you!

Frank

[Doug Heffernan]

Hear, hear! I don’t mind hearing “Let them eat cake”. Cake can be pretty good. Even the cheap version of red velvet at walmart isn’t too hard to choke down.

However you cut spending when your expenses outpace your income, any single household budget is not exactly analogous to the US federal budget. Conservatives love this line, and it does resonate, but it is kinda wrong, for many reasons.

[Heresolong]

But apparently you can't think of any of those reasons so you just make an unsupported claim and click "submit"?

[CountmontyC]

It would only be wrong if there was no wasteful spending and we know that isn't the case. We know that there are hundreds of billions that the federal budget could be cut by.
Start with some of the small stuff like PBS,NEA and the money being given to Gaza. Then start cutting agency budgets like the IRS, FBI , HUD , the Department of Education.
And if you don't want to cut just freeze all spending at current levels until the deficit is gone. It wouldn't take that many years either. Probably only 4-6 years and economic growth would deal with the annual deficit. Just takes spending restraint.

[Mudhen]

So if two people had the opportunity to invest $1000 in Apple in the late 1990s. Person A decides to keep driving their POS auto to order invest. Person B decides to instead enjoy life and spend the same $1000 on something else.

Cut to 2024 and Person A is now a multi-Millionaire while Person B is still approaching retirement with few assets or retirement savings. Of course under Progressive thinking Person A should be punished for being responsible while Person B deserves your sympathy and tax dollars.

[JoeFromtheBronx]

“The biden solicitor general’s office and justice ketanji brown jackson think that cases under the tax clause or the 16th amendment are political questions”

What about the Biden Solicitor General’s office and Justice Ketanji Brown Jackson?

Justice Jackson does not truly believe they are political questions. She references “two relevant” rules (apportionment and uniformity, depending on the tax).

She says courts should have a “limited” role in interpreting tax policy. Not “no” role. When people on this blog over the years toss around words like “essentially,” I feel concerned.

I do grant Congress has broad powers, checked and balanced by a political system that has real teeth in recent years, over taxation.

The policy might as Justice Jackson says “outrage” (including the tax cuts that benefit the very rich) but their constitutional doubts are far from clear. We are left with curious hypos about how taxes on factories or ships are “direct” taxes now.

Yes, I think that is in most cases not something the courts should second guess. When the Framers themselves found the term “direct” taxes a mystery, the courts should define quite narrowly when second-guessing congressional policy, which was the policy back in the 1790s except for a 5-4 case that was dubious when it was decided.

[JoeFromtheBronx]

edit noted

[myself]

This means that the government could tax increases in the value of your house or apartment

You mean property taxes?

[Mr. Bumble]

No. A "wealth tax" based on the value of your home (as determined by who?) regardless of how much equity you have.

[myself]

For most people, their home forms the bulk of their wealth.

And the value of that home is assessed and taxed accordingly, ie a "wealth tax". So if the value of your home goes up the government will tax increases in the value of your house or apartment.

It seems to me the US has a functional wealth tax for most people, just not the primary wealth of the ultra-rich.

[Bruce Hayden]

Careful here. What we are talking about here is the federal power to tax. Property taxes, so far, are state taxes. Under the (amended) Constitution, the federal government can impose 1) excise taxes; direct taxes, if apportioned among the states; and 3) income taxes. States don’t have these restrictions, just like they have general police powers, and the federal government does not.

[Joe_dallas]

correct

[myself]

I understand the distinction, I guess my point is two fold.

1) It's not true that "government" doesn't have a wealth tax, just the US federal government.

2) There's a narrative that wealth taxes are somehow an extreme policy tool. The fact that the majority of the population is already paying a wealth tax matters to this narrative.

[DaveM]

An important reminder, I thought. Never forget Federalism.

[Dr. Ed 2]

Except that bridge was crossed with Obamacare.

[F.D. Wolf]

It seems to me the US has a functional wealth tax for most people

"The US" has no such tax, though many states and localities do, though these are limited to real estate, as I am unaware of any state with a general "wealth tax". (And for good reason, as people affected would just move to another state). Regardless, of course, the states, unlike the federal government, are not limited by the Constitution's requirement that direct taxes be apportioned.

[Krayt]

"Use" taxes in states are a wealth tax. It's a half-assed way to apply a sales tax proportional amount on stuff bought out of state.

In some states it goes beyond that. How much do you own, business? Pay us 5% of that every year. Your buildings, your desks, your carpets, etc.

[Clayton Cramer]

I was surprised when doing a job interview in North Carolina to find they had a personal property tax. Yet another reason not to move there. I guarantee any wealth tax will exempt Billionaire Democrats.

[Brett Bellmore]

If it's anything like the one in South Carolina, it takes the place of vehicle registration fees. In theory it applies to everything, in practice only to a few high ticket items.

[Clayton Cramer]

That is the goal is it not for Democrsts? Screw the middle class to subsidize Zuckerberg and peers?

[Joe_dallas]

Bumble - adding to your comment -
A large portion of the "increase in value of a home " is inflation, which is not true appreciation (or income in any economic since).

Secondly, the cost of replacing your home with similar property is going to be of similar cost, Thus there is no true income under any economic theory. (that is even without regard to the transaction costs).

Your last comment is very valid - "value of your home (as determined by who?)" As we all know, There is considerable controversy every year with the local property tax appraisal districts .

[bernard11]

the cost of replacing your home with similar property is going to be of similar cost, Thus there is no true income under any economic theory.

Not so. Not at all. Let's say you sell your house for $1M. You have a real (inflation adjusted) gain of $200,000. Under some assumptions - you don't move to a different city, or from an urban to a rural home, it is reasonable to assume the cost of replacing it is $1M. But so what? What you choose to spend the proceeds on is a different question than whether you had income.

If you sell a stock at a profit it will cost you the proceeds (actually a bit more) to buy it back right away. Does that mean you didn't make a profit? Of course not.

[Brett Bellmore]

Does it matter for this argument that the US tax code actually exempts the first $250K, (Or $500K for married filing jointly.) of such capital 'gains'? And it goes away entirely if you spend the money buying another house? (My state, SC, has a similar provision.)

IOW, the federal tax law only treats capital gains on housing as taxable if the house is viewed as an investment property, rather than a home, up to a limit that sweeps in most of the population.

[bernard11]

Good question.

I don't think it matters, because it's just an adjustment to the tax calculation, but I'm not sure.

[Brett Bellmore]

The increase in value is the capital gain, though, so in your example?

Even if you're single, no capital gain! That was kind of my point. I don't think the existing tax treatment has any constitutional implications. Just that you need to go to much more expensive than median housing before this becomes an issue with primary residences, under current law.

The real issue is that, in theory, an income tax couples the tax to the ability to pay. A tax on unrealized gains does not, it can easily confront you with taxes you're, as a practical matter, incapable of paying, short of selling off your assets.

And given churn in prices, becomes a way to transfer a large fraction of privately held wealth to the government each year.

But, of course, that would be the point of taxing unrealized gains. What's going on is that government spending is exceeding the level capable of being sustainably funded by taxing current incomes, and borrowing to make up the difference is starting to max out, so they're exploring the possibility of draining the capital reserves of the private sector, just to keep up the spending levels for a few more years.

Looking at doing this sort of thing is an indication that we're approaching the end game for explosive growth of federal spending.

[bernard11]

borrowing to make up the difference is starting to max out, so they’re exploring the possibility of draining the capital reserves of the private sector, just to keep up the spending levels for a few more years.

First, nobody is "exploring the possibility of draining the capital reserves of the private sector." Take of your tin hat for a while.

Second, "borrowing to make up the difference" is not "starting to max out." The market is willing to lend the US government money for 30 years at 4.4%

Your point about unrealized gains is a good one, IMO, but there is no reason to surround with conspiracy theories.

[Joe_dallas]

Bernard – you miss the main point – The holding in Moore allows the government to tax the unrealized appreciation in your home or any other asset you hold (assuming congress amended the internal revenue code to tax such unrealized income).

As you may recall, one of the government arguments used to justify the taxation of unrealized gains was that Congress would face political pressure and not enact a tax on other unrealized gains.

[bernard11]

Joe,

You switched horses.

So you don't care to defend what you said about there being no real income in your example? OK. Good.

The holding in Moore allows the government to tax the unrealized appreciation in your home or any other asset you hold (assuming congress amended the internal revenue code to tax such unrealized income).

Yet the next-to-last paragraph of the decision (p.24) says:

The Moores argue that realization is a constitutional requirement; the Government argues that it is not. To decide this case, we need not resolve that disagreement over realization.

[Krayt]

That's burning peoplr now. House inflation has brought back something akin to 1970s bracket creep. You owe 4% of 20% more!

[bernard11]

[bernard11]

A “wealth tax” based on the value of your home (as determined by who?) regardless of how much equity you have.

The market value of your house is not part of your wealth. Only the part over and above what you owe. Ever seen a balance sheet?

[Clayton Cramer]

Many retirees own their homes free and clear. If you want to see them really angry, remember many of us only have a few years left and there are few punishments the government can impose more horrifying than living in poverty for a few years.

[bernard11]

No doubt, Clayton.

It's important to remember that politicians like being re-elected. I suspect such a tax, in any significant amount, is so unlikely to pass that the Constitutional issues would never get to court.

[Joe_dallas]

Does the Federal government access property taxes?
Does 16A allow direct taxes on property?

Prior to Moore - taxes on property were considered a direct tax which the federal government is barred.
Note that states are not barred from assessing property taxes under the US constitution.

One of the many problems with the Moore holding
A) It forgoes the income realization requirement for indirect taxes under 16A
B) the holding allows the morphing of precedent which eventually allows something that is directly banned under the constitutions - such as what happened in Kelo.
Hawaii Housing Authority v. Midkiff, 467 U. S. 229, and Berman v. Parker, 348 U. S. 26,

Same with Gamble the morphing of precedents allow something directly banned by the constitution to be "constitutional - Double jeopardy is directly banned in 5A, but the morphing of dual sovereign and different statutes creates two separate offensives out of one.

[Hugh]

I'm amazed that a constitutional law professor would be so ignorant of a basic fact: if the Constitution is silent on an issue (abortion) or explicitly authorizes something (income tax) then the issue is a "political question." What part of "from whatever source derived" is unclear?

I happen to think taxing assets that were originally derived from someone's income, but are not realized, is a bad idea from a policy perspective. But that doesn't make it constitutionally forbidden. And the claim that "Joe Biden is going to tax the value of your unsold home" is ludicrous. AOC isn't president yet, although if America's wealthy class continue to act like the Russian elite circa 1910 she may get elected.

This post shows Calabresi is angling for a spot in the Trump DOJ. That can be the only logical explanation for this kind of nonsense.

The only other option is that this blog has joined the ranks of The Onion as a parody.

[myself]

This post shows Calabresi is angling for a spot in the Trump DOJ. That can be the only logical explanation for this kind of nonsense.

The only other option is that this blog has joined the ranks of The Onion as a parody.

Those options aren't mutually exclusive.

[Brett Bellmore]

" if the Constitution is silent on an issue"

Why did they even bother ratifying the 10th amendment, anyway? I've yet to see a court decision that didn't ignore it entirely.

[Clayton Cramer]

N.y. c. U.s. (1992?) Printz v. U.s.

[Joe_dallas]

Hugh 22 hours ago
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I’m amazed that a constitutional law professor would be so ignorant of a basic fact: if the Constitution is silent on an issue (abortion) or explicitly authorizes something (income tax) then the issue is a “political question.”

A) from what ever source derived - is not the question
B) its the new definition of income that is the problem

[JoeFromtheBronx]

I don't think the Constitution is "silent" on abortion in various respects (not forcing people to give over their bodies seems covered, for instance) but that seems to skip over the 9th Amendment.

[y81]

The first problem is that the income tax statute in question was passed by the Republicans during the Trump administration, so I presume Biden would have that ready as an answer. The second problem--assuming, rather unrealistically, that Trump and Biden are actually going to debate tax theory and policy--is that Calabresi is going way overboard here: the questioned tax only applies to gains realized at the corporate level, but not distributed to shareholders, not to wholly unrealized gains, much less static possessions. Realized corporate gains have been taxed to shareholders in a variety of contexts for years, without leading to a wealth tax. I'm not sure if any of the Conspirators has ever been a partner in a law firm, but if they were, they would definitely have been taxed on income which was realized, but which may or may not have been distributed to them.

[Social Justice is neither]

Given the current administration doesn't believe in private property outside the Party is any of this a shock? This is how you kill an economy and drive any growth or prosperity to more favorable pastures.

[MollyGodiva]

It is called a property tax and they are common.
And yes, unrealized capital gains should be taxed.

[Mr. Bumble]

...and unrealized losses?

[Darth Buckeye]

But you can’t impose an income tax like a property tax. Either words have meaning or they don’t. Jackson and her clerks seem to have a Humpty Dumpty approach to language and the law. She wants a dramatic increase of government's ability to collect taxes.

The "unrealized" gains in this case were only so at the entity level. The gain and been realized by the foreign entity.

[bernard11]

But this is how LLC members are taxed - on the company's profits, not the distributions. It's hardly unheard of in our tax code.

[Darth Buckeye]

One must factor in the differences between GAAP and tax accounting principles. An entity can choose cash-basis or accrual basis; individuals cannot. I have not dug into the facts...that is too much like work and I am not getting paid for this. But the issue as to whether income realized/recognized at the corporate/entity level has been distributed is different than the issue of whether the income was realized/recognized at all.

If you have a subchapter S corporation that sells property, where title has changed hands and where payment has been received by the entity, it does not matter whether the proceeds have been distributed. The realization of the income (the transfer of the property to the buyer and the receipt of the payment by the seller) is one issue; the distribution is another. The facts in the case at issue involved situations where foreign entities were selling property and had not yet distributed the proceeds to the entity's owners.

[Joe_dallas]

A few points

In order for the individual to be taxed on the corporation's income , the shareholders must make an affirmative election to treat the corporation as a pass through entity - ie the S election. Without the affirmative election, the corporation income is taxed at the corporate level.

Foreign corporations are not eligible for that election. Further, the foreign corporation is not subject to US taxation unless it has US source income.

The third point is that there is a tax treaty with India. With the caveat, that I have not read the US/India tax treaty (at least not recently on this issue) , nor did I see any arguments addressing the treaty provisions in the briefings, etc, I would think the treaty provisions would bar the taxation in this fact pattern. Most of the tax treaties are very similar as to what income can be taxed in which state (state being the term to used to define the country). I just dont recall any treaty provision that would allow one state to tax the income of an entity located in the other state or allow for the attribution of income to a resident of the taxing state.

So

[Joe_dallas]

Darth - slight disagreement on individuals and the accrual basis. When I started in the professional as an entry level tax accountant in the early 80's, the firm had 7 or 8 individuals on the accrual method of accounting (all oil and gas individuals with working interest ). It was a fairly common to have oil and gas individuals on accrual method in the 60s and 70's.
Circa, early 90's we filed a change of accounting method to convert one client back to cash basis which was denied. fwiw he was an elderly client who no longer had significant income and we ignored the denial and reported his income on the cash basis.

[Frank Drackman]

I've got some "Unrealized" Jizz in a sock you can tax

[Davy C]

So, this scenario...

1. I buy 1000 shares of GameStop stock at $1 each, for $1000.
2. For weird reasons, the stock goes up to $81.25 per share. It's now worth $81,250.
3. The government taxes me 15% on my unrealized gain. The tax comes out to $12,037.50.
4. The stock goes down to $10.15 per share. I sell for $10,150.
5. I sold at a price more than ten times its original price... but I come out losing not only my entire investment, but several times more than that.

So, I hope you have a way of implementing this that doesn't result in an arbitrarily high tax liability if there's a bubble.

[damikesc]

Imagine when wealthy people with widely varied portfolios routinely get write-offs for unrealized capital gains losses.

It cannot be a one-way street.

[Krayt]

And yes, unrealized capital gains should be taxed

Bizarre. Why should you jump to that as policy? The only ones who want it are incontinent corruptions spending way too much.

This will not balance the budget or reduce borrowing. Government, AKA corruptions, will just see it as an opportunity to spend all this new influx, and keep borrowing at the same rates.

The whole thing is grotesque.

[Darth Buckeye]

I am reading Jackson’s concurring opinion. It is very unwise. She writes that there is no “recognition” or “realization” requirement in our tax law.

I am a tax lawyer with an LL.M. from the University of Florida and over 35 years of experience. Her opinion is embarrassing. She and her clerks should be ashamed of themselves. Her opinion goes way beyond what is needed for this case.

[Joe_dallas]

Darth Buckeye 20 hours ago
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"I am reading Jackson’s concurring opinion. It is very unwise. She writes that there is no “recognition” or “realization” requirement in our tax law."

I concur with your opinion of jackson and her clerks.

The argument that was being made by jackson was that at the time of drafting of the 16 amendment, the drafters envisioned the term "income " to be a very broad term encompassing an extremely broad concept of income instead of the commonly known definition of income which almost everyone agreed during the time had the realization concept.

[Joe_dallas]

Darth - curious if you explored the treaty aspect that I mentioned below. While I am not a treaty expert, the issue does come up every so often. I just dont recall any treaty that I have dealt with that would allow / or contemplate the taxation of a resident of one state on the income earned by an entity in a different state.

[Voize]

A tax treaty might regulate this practice but if it is silent on the question wouldn't that leave it entirely to the domestic law of the taxing state?

[Joe_dallas]

the language of Article 7 would seem to bar the taxation of an Indian Corporation income in the US.

ARTICLE 7
Business Profits
1. The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in the other State but only so much of them as is attributable to

[Darth Buckeye]

Jackson and her clerks completely misunderstand the impact of Eisner v. Macomber. Shame!

[Dr. Ed 2]

Darth, tax law is whatever a SCOTUS majority says it is -- and while I don't like it, reality is that the wealth inequity of retirees is going to be taxed. I'd be happy if it were *only* means testing of Social Security and public pensions, but it is going to be more than that.

The last of the Baby Boomers turn 65 next year, even without the illegal aliens, the Medicaid budget is a crisis in every state that I've looked at, and that's only because they can't print money the way the Feds can -- although that is going to be a problem before long.

We're going to have some form of wealth confiscation -- the only question is how bad it will be.

[Krayt]

Nobody touches social security, because that's the fast way out the door (and thus the corruption gravy train ends.) Do you think they'll start seizing retirement money?

[Dr. Ed 2]

Yes, I do think it will be seized, the same way that FDR seized gold.
I don't see how they don't.

[Mr. Bumble]

Seize what? SS "trust fund" is IOUs.

[Magister]

The youngest Baby Boomers turn 60 this year, so Dr. Ed 2 is again wrong. The majority of Medicaid funding is federal, although states may struggle to pay for their share. And Dr. Ed 2 is politically aligned to view all taxation as wealth confiscation.

[Dr. Ed 2]

Dr Ed uses 1960 and not 1964 as the end of the baby boom. Up to half of Medicaid money is state money. And Dr. Ed is being nonpolitical in saying they're gonna tax wealth.

[Darth Buckeye]

I understand that. But it makes the law a royal b*ch to enforce.

[Clayton Cramer]

Only if you want retirees using their rifles for the purpose Federalist 46 envisioned.

[Frank Drackman]

You have to remember, Ka-grungy Jackson Brown isn't a Biologist

[Joe_dallas]

Darth Buckeye 21 hours ago
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Jackson and her clerks completely misunderstand the impact of Eisner v. Macomber. Shame!

Completely misunderstand Macomber is too polite. She demonstrates zero concept of a very common transaction and near zero concept of income or basic tax law. Definition of a dividend is taught in the first week of a Sub C course. (MS in accounting, not law school)

[bernard11]

How so? I thought the case merely said that a stock dividend wasn't income because it didn't do anything - it did not add to the value of the shareholder's ownership but was just a sort of cosmetic move.

(AFAICT these things are pretty much dead now, and rightly so.)

But why it should have any implications at all is a mystery to me.

[Yogis_dad]

Taxes on unrealized gains are wealth taxes and violate the constitution, just as ad valorem taxes are unconstitutional, unless levied via capitation. It is arguable whether any capital gain can be construed as income in the meaning of that nasty amendment, since it is not "earned." But the motive of everyone in government seems to be to garner more revenue, regardless of the probity of process.

[bernard11]

It is arguable whether any capital gain can be construed as income in the meaning of that nasty amendment, since it is not “earned.”

I don't see the word "earned" anywhere in the text. Would you also say interest. received is not income?

Sounds like totally made up BS to me.

[ReaderY]

A Solicitor General argues for maximal federal power?

I’m shocked, shocked, shocked!

What SG in the last hundred years hasn’t?

[Frank Drackman]

And the Marxist Stream Media wondered why Senator Menendez had several hundred thousand dollars in Gold bars in his closet(not that much money in todays Inflation-Altered-States Economy) Before I became an Independent Contractor, had to sweat the Practices, 401K every year, the “Non Discrimination Test” (like a CRNA is going to contribute as much as a Rich Basturd like me, even if they didn’t blow it on shoes/jewelry) Now I get to contribute as the Employer AND Employee (and makes “Performance Evaluations” much easier)
Got Audited once, no runs, no drips, no errors, and the IRS ended up paying me money (I know, you owe what you owe, but the only “error” I made was in under reporting one of my legal deductions)
Still, IRS Agents are Scum, and that’s the good ones, they show up like Nerdier Crocket and Tubbs, of course, at your place of business, go through all your shit, and then when they can't find nuthin (and you know you're really good when THEY "can't find nuthin") no apology, "my bad", just a friggin form letter and a check for my overpaid tax

Frank

[Krayt]

As their computers probably showed they owed you already, I’m surprised they bothered to audit at all. They must have thought you were hiding something in excess of that.

[Frank Drackman]

It was during the whole “Home Office” write off Era, you remember, get the 65 inch Plasma TV because you need to watch training DVDs(remember those?) I actually went by the rules, didn’t help.

[ReaderY]

This was an open and shut case. As Justice Kavanaugh’s majority opinion showed, shareholders and partners have been taxed on their pro rata share of corporate and partnership income since the !9th century. There are multiple federal tax provisions that do this today. S corporations are the most well-known but there are others as well. The plaintiffs made up a theory that magically excluded every one of these tax provisions except the one they challenged. But as Justice Kavanaugh rightly noted, courts tend to take made-up magical theories with a grain of salt.

[Joe_dallas]

ReaderY 18 hours ago
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"This was an open and shut case. As Justice Kavanaugh’s majority opinion showed, shareholders and partners have been taxed on their pro rata share of corporate and partnership income since the !9th century."

You statement is not even remotely true.

Prior to 1958, there was no such thing as Subchapter S which was enacted during the Eisenhower administration. Until that time, all income of a corporation was taxed at the corporate level
I dont recall when Subchapter K was added, though the unincorporated businesses (and general partnerships) were taxed at the individual level. Subchapter K was not needed until various states enacted provisions allowing the creation of limited partnerships. With limited exceptions, associations and business trusts were taxed as corporations ( see 1939 code)

Note also that the S election requires and affirmative election by the shareholders.

[ReaderY]

Justice Kavanaugh opinion noted that in determining what constitutes income, courts look at what the term meant when the 16th amendment was rayified. The opinion cites varioous 19th century state income tax laws that taxed shareholders pro rata shares of corporate income, long before there ever was a federal income tax. The fact that these laws may not have been coded “S” in their respective statute books may make your statement that “prior to 1958, there was no such thing as subchapter S” technically true, but completely irrelevant. Surely you’re aware that the number and letter designations used in statute books to classify each jurisdiction’s laws have no constitutional significance?

In creating S corporations for federal tax purposes, Congress followed a long traditionof tax laws that tax shareholders on a pass-through basis, often regardless of shareholder consent.

A big weakness with using S-corporation as the sole reference point is that it just isn’t very helpful to look only at what Congress chose to do half a century after the 16th amendment became law to understand the nature of the power the People and the States gave Congress when they enacted and ratified it. The fact that Congress used less than its full power in creating S-corporations doesn’t diminish its future use of its remaining power.

[Joe_dallas]

ReaderY
Your statement - "In creating S corporations for federal tax purposes, Congress followed a long traditionof tax laws that tax shareholders on a pass-through basis, often regardless of shareholder consent."

that statement is factually incorrect.

[ReaderY]

Do you have anything to say about the laws and cases going back to the 19th century that Justice Kavanaugh’s majority opinion cited in finding that there is such a tradition?

[Joe_dallas]

The 19th century was at least 13 years before the ratification of the 16th amendment

[Joe_dallas]

ReaderY

A) Kavanaugh starts out misrepresenting the history of pass through taxation. Read the first three pages of the opinion

B) the cases Kavanaugh cites -
Burk Waggoner treats the association taxable as a corporation. There is no pass through entity taxation
Heiner v Mellon is a corporation that converted to a partnership which is was an active choice of the shareholders to convert out of the corporation / do business outside the corporate entity
Helvering v National grocer was a case on the taxation of accumulated corporate income,

It is a long standing bedrock principle of taxation that corporation is taxable on its own income, and the shareholders are not taxed on the income unless an affirmative election is made by the shareholders.

My response is that Kavanaugh grossly distorts the holdings in those cases he cited from the 20th century - not the 19th century

[Frank Drackman]

So let me see, a theoretical increase in the worth of my house warrants me paying additional taxes, but forgiving some LGBTQ-MOUSE PhD's 6 figure Student Loan doesn't count as income for He/She/They/Zie??? It's not who you know, but who Hunter's whores Blow.

Frank

[ThePublius]

Wow, that's actually a wonderful point. Why isn't the student loan forgiveness considered income???

[Frank Drackman]

Pig finds a Truffle every now and then. Forgiven Credit Card debt sure as fuck is considered Income, don't ask how I know (back in the 80's when they'd give anyone with a pulse a Card, and an "Introductory" APR of %19.9, I'd have been better off borrowing from "Feech" La Manna (much better now)

Frank

[Krayt]

Why would the FF go to all the trouble to demand of anything seized by the government, it had to pay you for, if they could just declare it a wealth tax and seize it, uncompensated, anyway?

It makes a mockery of that.

[Krayt]

"But it applies to everyone and everything, not just specific instances!"

Not

Helping

Your

Case

Any

[ThePublius]

Who are you quoting?

[Krayt]

Just getting ahead of the inevitable.

[ThePublius]

The whole concept of a tax on unrealized capital gains is morally bankrupt. Synonyms for unrealized include future, imaginary, and so forth. Unrealized gains haven't happened! So they can't be taxed. This is doubletalk for taxing portfolio value, which is not income.

[John F. Carr]

Like many people in high tech I have had to pay taxes on the paper value of shares I could not sell.

[Clayton Cramer]

I only paid taxes,when I exercised my options. I did that to avoid paying AMT the following year when all those $.10 shares became $5 shares. (Yes, our CEO destroyed the value of our startup and we want to Nokia at a fire sale price.)

[Sorcer23]

At least as to stock, and perhaps some bonds, and some other easily fungible assets, what is to stop an individual from selling them a few weeks before the election, and a similar time in non-election years, and buying them back in mid-February. Yes, there would be capital gains taxes, but having paid those, and assuming many others did follow this example, the buy back would be cheaper than the selling price, making the decision to sell or pay the tax the owners prerogative. Surely someone else has thought of this annoying but possible run around the imposition of a wealth tax.

[Dr. Ed 2]

Brokerage fees?

[Clayton Cramer]

No fees in my IRA at Fidelity. Big capital gains taxes of course so the crooks in D.C. still make money to reward the Victims Studies majors and Green business scams.

[bernard11]

I don't follow your scheme.

Say I have stock worth $100/share, in which I have a $20 gain. In October I sell, paying $4/share CG tax.

In February I buy back in, at whatever the price is then. How does this help?

[Brett Bellmore]

I think the assumption here is that the stock market is being pumped up by the government just prior to elections? So that there would be a reliable peak just before, and crash right after?

I wouldn't say "reliable", but on average you'd do well buying the day after the election, and selling a year later.

[tuphat]

Where does the esteemed perfeser stand on section 475 of the Internal Revenue Code? Enacted in 1993, it requires dealers in securities (commercial and investment banks, for example) to annually mark-to-market most of their end-of-year securities holdings, and recognize the resulting gain or loss in taxable income. To my knowledge, no one has ever seriously challenged the constitutionality of this provision.

[Joe_dallas]

475(f) is an election by the taxpayer,

completely different attributing income from a different entity

I

[chizbro]

Has anybody mentioned that the cornerstone of the income tax is that they only tax you when you get the income, that is, when you have the money to pay?
And will the IRS let you deduct any of a loss of valuation, if it plans to tax the gains?

[Brett Bellmore]

The point would be to loot the private economy in order to keep the scam going for a few more years, so, that would be "nope".

[jdgalt1]

Anyone who thinks this is a new idea hasn't been paying attention. The exit tax known as FATCA has been taxing Americans "on their way out the door" on their unrealized gains for more than a decade.

And it is really a property tax, not an income tax, so SCOTUS should have ruled the other way. A property tax is a direct tax and so must be apportioned by state, which this is not.