Shock, Awe, & Expropriation: The Act of State Doctrine and Loss Deductions under Section 165 of the Internal Revenue Code

44 Pages Posted: 24 Oct 2007

See all articles by Bobby L. Dexter

Bobby L. Dexter

Chapman University, The Dale E. Fowler School of Law; UC Irvine School of Law

Abstract

The Act of State doctrine generally dictates that American courts not sit in judgment with respect to the acts of a foreign sovereign on its own soil. Courts commonly reason that although nothing in our Constitution requires recognition of the doctrine, adherence to its mandate effectively allows the Judicial Branch to steer clear of any actual or perceived interference with the Executive Branch's conduct of foreign policy. Wholly aside from established notions of the proper separation of powers, appeal to the doctrine is also a generous display of international comity, allowing domestic courts to defer to the sovereign authority of a foreign power. Courts hearing domestic tax disputes involving foreign expropriation losses routinely appeal to the Act of State doctrine in refusing to characterize the loss as a theft. In this Article, I question whether a court appealing to the Act of State doctrine to reach one conclusion is obligated (even if only for the sake of analytical consistency) to defer to or recognize the executive, legislative, and judicial acts of that state (or the acts of other branches) in reaching related conclusions, consistent with established tripartite articulations of the Act of State doctrine. In arguing against a deconstructionist paradigm, I reason that a monolithic mindset enhances administrability, effectively polices judicial whim, and minimizes the potential for taxpayer whipsawing.

Keywords: Act of State, Foreign Expropriation, Section 165, Theft, Comity, Loss Deductions

JEL Classification: K33, K34

Suggested Citation

Dexter, Bobby L., Shock, Awe, & Expropriation: The Act of State Doctrine and Loss Deductions under Section 165 of the Internal Revenue Code. Tulane Law Review, Vol. 82, 2007-2008, Available at SSRN: https://ssrn.com/abstract=1024083

Bobby L. Dexter (Contact Author)

Chapman University, The Dale E. Fowler School of Law ( email )

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Orange, CA 92866-1099
United States
(714) 628 - 2633 (Phone)
(714) 628 - 2576 (Fax)

UC Irvine School of Law ( email )

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Irvine, CA 62697-3125
United States

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