Negative Basis Reconsidered: Of Hoaxes, Traps for the Unwary, and the Need for Reform
32 Pages Posted: 28 Apr 2015
Date Written: 1996-1997
Congress and the IRS generally abhor negative numbers, particularly as a measurement of tax basis. This article reconsiders their aversion to negative basis in light of Lessinger v. Commissioner, a case which is significant and controversial not so much for its holding on negative basis, but for its attempt to judicially circumvent statutorily prohibited negative basis. Rather than focusing on the correctness of Lessinger, however, this article addresses the negative basis prohibition, which appears to underlie the case.
Keywords: Basis, consolidated return excess loss account, deferred gain, IRC section 357(c), negative basis, nonrecognition of realized gains or losses, nonrecognition policy, nonrecourse liabilities, zero basis doctrine
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