Tax Court holds that the IRS May Reject a Taxpayer's Offer in Compromise Where He Dissipates Assets Through Day Trading Losses

The Tax Court just held in Tucker,TC Memo 2011-67 (Tax Court Memo 2011) , that a taxpayer's day-trading losses while owing taxes constituted the dissipation of assets.  Thus, the lost assets were included in his reasonable collection potential ("RCP") analysis.

The procedure of the case went as follows: Tucker owed taxes, the amounts were not in dispute, but he claimed an inability to pay. In connection with the offer, Tucker submitted a Form 656, "Offer in Compromise" (OIC).  The OIC was evaluated and IRS notified Tucker that it had determined he could pay the liability in full. Tucker requested a collection due process (CDP) hearing after a lien was filed.
The Appeals Office upheld the filing of the lien, and Tucker appealed to the Tax Court. Tucker sought review in the Tax Court, claiming Appeals abused its discretion in rejecting Tucker's OIC. The Tax court held that the Service properly included the dissipated assets in its calculation of the taxpayer's RCP.  The tax court determined that Tucker's losses from engaging in "the highly speculative and volatile activity of day trading" were not unforeseeable. He had had the cash in hand that would have paid in full the taxes, interest, and penalties that were owing, but chose rather to devote that money to a risky investment.  The tax court therefore opined that Tucker's situation was therefore of his own making.

Obama administration states tax holiday for corporations that repatriate income from tax haven countries is poor policy

The federal government loses corporate income tax revenue from the shifting of income into low-tax countries, often referred to as tax havens. The revenue losses from this tax planning are hard to estimate, but it has been suggested that the annual cost of offshore tax abuses may be around $100 billion per year.  Pursuant to Section 862 of the Internal Revenue Code ("the Code"), corporations formed in the U.S. are taxable on certain income from outside the U.S.  Foreign corporations with U.S. owners however, can often earn and accumulate certain income without federal tax.  For controlled foreign corporations (CFCs),defined in Section 957 of the Code, the non-U.S.-source income may be shielded from U.S. tax until it is actually brought back to the U.S. (i.e., repatriated and distributed to the U.S. owners).  Remarkably, the American Jobs Creation Act of 2004 ("AJCA") provided a one year tax special treatment for CFCs to repatriate their income by providing an 85% dividends-received deduction.  It has been estimated that approximately $312 billion was repatriated under this provision.
Recently, in a blog post on March 23 titled “Just the Facts: The Costs of a Repatriation Tax Holiday,” the Treasury Assistant Secretary for Tax Policy, Michael Mundaca, stated that there was no evidence that the AJCA repatriation tax holiday increased U.S. investment or jobs, and that it in fact cost taxpayers billions of dollars. He wrote that “just five firms got over one-quarter of the tax benefits of the repatriation holiday, and just 15 firms got more than 50 percent of the benefits,” and cited to a Congressional Research Service report that found most of the largest beneficiaries actually cut jobs following the tax holiday and used the repatriated funds to repurchase stock and pay dividends.