Lost in Translation

Taxes The Tax Magazine, March 2019

23 Pages Posted: 14 May 2019

See all articles by Adam Chodorow

Adam Chodorow

Arizona State University (ASU) - Sandra Day O'Connor College of Law

Date Written: March 15, 2019

Abstract

Today’s tax code contains a dizzying array of loss-limiting provisions, serving a wide range of purposes. Some are normative, such as the ban on deducting personal losses, but the vast majority are designed to prevent taxpayers from manipulating the tax rules to gain advantages tax authorities did not intend. These anti-abuse provisions can add significant complexity to the law and are often over- or under-inclusive, sometimes both at the same time. Most articles considering loss limiting provisions focus on only one or two provisions in isolation. This article takes a more comprehensive approach with two key goals. The first is to describe and categorize the different provisions to identify common abuses, key features of the tax law that create the conditions for abuse, and the different techniques used to prevent abuse. The second is to consider and suggest potential changes to these provisions to reduce complexity and improve their efficacy.

Keywords: losses, passive activity, tax shelters, economic substance, related party transactions, wash sales, basis

JEL Classification: H2, H26

Suggested Citation

Chodorow, Adam, Lost in Translation (March 15, 2019). Taxes The Tax Magazine, March 2019, Available at SSRN: https://ssrn.com/abstract=3371988

Adam Chodorow (Contact Author)

Arizona State University (ASU) - Sandra Day O'Connor College of Law ( email )

Box 877906
Tempe, AZ 85287-7906
United States

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