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The Fabricated Unwind Doctrine: The True Meaning of Penn v. Robertson

52 Pages Posted: 8 Mar 2011 Last revised: 7 Apr 2015

John Prebble QC

Victoria University of Wellington - Faculty of Law; Institut für Österreichisches und Internationales Steuerrecht, Wirtschaftsuniversität Wien; University of Notre Dame Australia - School of Law

Chye-Ching Huang

University of Auckland

Date Written: 2011

Abstract

When taxpayers discover that their transactions have unwanted tax consequences, they routinely rely on the unwind doctrine found in Internal Revenue Service Revenue Rulings 80-58. Nowadays, “unwinding” has become a “common if not ubiquitous feature of tax practice.” This article finds that the unwind doctrine has no firm basis in case law. Instead, the unwind doctrine is an Internal Revenue Service (IRS) fabrication based on the IRS’s misinterpretation of the case Penn v. Robertson 115 F2d 167 (4th Cir 1940). If the authors are correct one result may be that recipients of TARP-funded bonuses who gave the money back in the face of public opprobrium may (a) be taxable on the bonuses and (b) be unable to set the repayment off against taxable receipts in calculating their taxable income.

Keywords: income tax, tax law refrom, unwind doctrine, unwanted tax consequences, rescission doctrine

JEL Classification: K34

Suggested Citation

Prebble QC, John and Huang, Chye-Ching, The Fabricated Unwind Doctrine: The True Meaning of Penn v. Robertson (2011). Hastings Business Law Journal, Vol. 7, No. 1, 2011; Victoria University of Wellington Legal Research Paper No. 17/2011. Available at SSRN: https://ssrn.com/abstract=1781269

John Prebble QC (Contact Author)

Victoria University of Wellington - Faculty of Law ( email )

PO Box 600
Wellington, 6140
New Zealand
+64 4 463 6311 (Phone)
Papers Indexed at HOME PAGE (Fax)

HOME PAGE: http://www.victoria.ac.nz/law/staff/prebble-scholarly.aspx

Institut für Österreichisches und Internationales Steuerrecht, Wirtschaftsuniversität Wien ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

University of Notre Dame Australia - School of Law

Sydney Campus, New South Wales
Australia

Chye-Ching Huang

University of Auckland ( email )

12 Grafton Rd
Private Bag 92019
Auckland, 1010
New Zealand

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