Tax Litigation Research Articles

The Method of Comparables and Tax Court Valuations of Private Firms: An Empirical Investigation

This paper introduces a series of valuation models that mimic important features of regulatory prescriptions and legal precedent for the method of comparables as applied in estate and gift tax cases. We evaluate the models using out-of-sample estimation to determine which ones have the most desirable statistical properties for prediction. We then compare the predictions from these models to the valuations put forth by taxpayers, the IRS, and judges in estate and gift tax cases. This analysis reveals that taxpayers and the IRS propose values consistent with their underlying incentives, but significantly different from most bias-adjusted forecast models. The judges choose values consistent with the average value of the two experts and with bias-adjusted forecast models. Thus, the tax litigation system appears to ultimately produce an estimate of value that is consistent with an objective application of the method of comparables to the available data.

The Politics in the Canadian Judicial Decision Making Process: Economic Analysis of Tax Litigation

The application of economic theories, rightly or wrongly, has a major impact on our lives. Economic reform inevitably leads to political reform. However, it remains unanswered whether economic reform leads to reform in the judicial decision making process. Although there are a number of studies on the economic analysis of taxation, that is, the study of economics and tax policies, there is virtually no literature on the economic analysis of tax cases. The time is ripe for a study of the connection between economic analysis and case law in taxation as Canada approaches the twenty-first century. This article investigates whether the federal courts in Canada have taken economic reality into consideration in making their decisions on tax matters. This is the first attempt to address the issue; although somewhat exploratory and speculative, it provides a starting point. This article first discusses tax scholarship in Canada. Then, the relevance of law and economics is discussed with special emphasis on the use of economic tools to analyse common law cases. From these discussions, the theories of economics are linked to tax cases. Finally, the author analyses trend of applying economic analysis in federal tax cases. This article should serve as a starting point for a future analysis of the cases determined by the Supreme Court of Canada.

THE TAX LITIGATION DECISION: AN ANALYSIS OF THE SMALL CLAIMS DIVISION OF THE U.S. TAX COURT*

ABSTRACTOne of the more difficult but intriguing problems in the tax field is the decision of when (and how) to settle tax disputes with the Internal Revenue Service (IRS) and when (and how) to litigate. Research in this area of decision making is limited and has concentrated on the probability of winning in the judicial system. This paper examines the tax litigation decision for suits in the Small Claims Division of the U.S. Tax Court. Four examples are presented which involve varying degrees of information regarding the likelihood of a settlement and differing risk attitudes. The maximum amount the taxpayer should be willing to spend in pursuing litigation is derived for each case.

Suit, Settlement, and Trial: A Theoretical Analysis under Alternative Methods for the Allocation of Legal Costs

Suit, Settlement, and Trial: A Theoretical Analysis under Alternative Methods for the Allocation of Legal Costs

IRS Rulemaking: Drawing the Fine Line between Debt and Equity

The Internal Revenue Service has in the last year proposed a number of rules potentially damaging to small businesses. Perhaps the most damaging rule, as proposed initially, is one distinguishing for tax purposes between debt and equity contributions to a corporation's capital. The proposed rule would reduce the potential for tax abuse and litigation, but would also eliminate legitimate tax deductions claimed by small businesses in the past. The “debt-equity” rule is analyzed below, and refinements are proposed for IRS consideration. These refinements would moderate the adverse effects of this rule on small businesses without compromising its basic objectives.

Court Awarded Attorneys' Fees in Tax Litigation: 42 U.S.C. § 1988

Court Awarded Attorneys' Fees in Tax Litigation: 42 U.S.C. § 1988

The Judicial Public Policy Doctrine in Tax Litigation

The Judicial Public Policy Doctrine in Tax Litigation

Collateral Estoppel: Loosening the Mutuality Rule in Tax Litigation

Collateral Estoppel: Loosening the Mutuality Rule in Tax Litigation

Effect of State Court Decrees in Federal Tax Litigation: A Proposal for Judicial Reform

Effect of State Court Decrees in Federal Tax Litigation: A Proposal for Judicial Reform

Taxation. Nonadversary State Adjudication of a Property Right Held Binding in Federal Tax Litigation

Taxation. Nonadversary State Adjudication of a Property Right Held Binding in Federal Tax Litigation

Conclusiveness of Trust Terms in Tax Litigation: Circumvention of the Clifford Rule

Conclusiveness of Trust Terms in Tax Litigation: Circumvention of the Clifford Rule

Collateral Estoppel in Tax Litigation: Res Judicata. Federal Tax Litigation. Collateral Estoppel Inapplicable after an Intervening Change of Law

Collateral Estoppel in Tax Litigation: Res Judicata. Federal Tax Litigation. Collateral Estoppel Inapplicable after an Intervening Change of Law

Evidence. Presumption of Capacity to Bear Children. Rebuttal in Income Tax Litigation

Evidence. Presumption of Capacity to Bear Children. Rebuttal in Income Tax Litigation

Federal Tax Litigation and the Tax Division of the Department of Justice

Federal Tax Litigation and the Tax Division of the Department of Justice

The Powers of a Court of Equity in State Tax Litigation

The Powers of a Court of Equity in State Tax Litigation

Tax Litigation in Illinois

I Ef^HE past five years in Illinois have been a period of very unusual interest in the field of tax litigation. It would be difficult to find another instance in which so many important cases, involving questions of such vital consequence from a legal and fiscal point of view, have found their way to the court of last resort of the state and to the federal courts within an equal period of time. Included in the series of cases were several involving the validity under the present state constitution of forms of taxation which, though familiar elsewhere, were novel in Illinois experience.' The enactment of these new tax laws was a result of substantially the same forces and conditions which operated to clog the courts with suits in which the legality of administrative acts and procedures incident to the enforcement of the general property tax was subjected to vigorous and bitter attack by thousands of embittered property owners. They were in response to the need for more revenue and a wider distribution of the tax burden. For many years the burden of taxation on real property has been steadily increasing. Attempts which have been made on several occasions to amend the antiquated revenue article of the state constitution2 in such a manner as to empower the legislature to establish a modern revenue system based upon the principle of an equitable distribution of the tax burden have foundered upon the shoals of jealousy and suspicion between the people of the urban and rural areas

Res Judicata in Tax Litigation

Res Judicata in Tax Litigation