Academic journal article Journal of Accountancy

Does Carlton End the Retroactivity Debate?

Academic journal article Journal of Accountancy

Does Carlton End the Retroactivity Debate?

Article excerpt

Income tax changes in the Omnibus Budget Reconciliation Act of 1993 (OBRA) were imposed on a retroactive basis, a maneuver some tax lawyers are calling unconstitutional. But the U.S. Supreme Court decision in U.S. v. Jerry W. Carlton last June approved retroactive tax provisions supported by a "legitimate legislative purpose furthered by rational means." In Carlton, an estate purchased shares of MCI and then sold them to MCI's employee stock ownership plan (ESOP). Carlton argued the original wording of IRC section 2057 (which was created in 1986) allowed it to deduct 50% of the sales proceeds. In 1987-one year after the shares were sold--Congress amended section 2057 retroactively to limit its reach to sales of securities directly owned by a decedent immediately before death. (For more details, see Tax Case, JofA, Aug.94, page 24.)

Judge Harry A. Blackmun said the purpose of enacting this amendment was neither "irrational nor arbitrary" because Congress acted to correct what it reasonably viewed as a mistake that would have resulted in an unanticipated revenue loss. Moreover, Congress acted "promptly" and established only a "modest" period of retroactivity. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.