Hester Prynne, Lydia Bennet, and Section 306 Stock: The Concept of Tainting in the American Novel, the British Novel, and the Internal Revenue Code

Abstract

Did Nathaniel Hawthorne's novel, The Scarlet Letter, inspire 306 of the Internal Revenue Code? This code provision adopts a peculiarly Hawthorne-like solution to a tax avoidance scheme known as the preferred stock bailout. 306 taints the stock used in the scheme as Section 306 Special rules then govern all subsequent dispositions of the tainted stock. With its concept of a taint that can dog a stock from acquisition to disposition, 306 might have been designed by a novelist rather than a tax technician.