The Income Tax Consequences of Sales of Present Interests and Future Interests: Distinguishing Time from Space

54 Pages Posted: 30 Apr 2006

See all articles by Jeffrey L. Kwall

Jeffrey L. Kwall

Loyola University Chicago School of Law

Abstract

An owner of property can divide ownership spacially, by selling all rights to a phyically discrete part of the property, or temporally, by selling a present interest or a future interest. This Article develops a Model illustrating inconsistencies under existing law between the economic and income tax consequences of a temporal division. It also explores the tendency of courts to equate, erroneously, a temporal division to a spacial division. When a temporal division is equated to a spacial division, income deferral will result from a temporal division. The Article develops an analytical framework to remedy the income deferral problem and to resolve, in a manner consistent with economic reality, the many other income tax issues raised by a temporal division. Finally, the Article demonstrates how the foregoing framework can be adapted to deal with the special problems raised when wasting property is the subject of a temporal division.

Keywords: present interest, future interest, remainder interest, joint purchase, temporal division

JEL Classification: E62, H21, H24, K34

Suggested Citation

Kwall, Jeffrey L., The Income Tax Consequences of Sales of Present Interests and Future Interests: Distinguishing Time from Space. Ohio State Law Journal, Vol. 49, No. 1, pp. 1-53, 1988, Available at SSRN: https://ssrn.com/abstract=898851

Jeffrey L. Kwall (Contact Author)

Loyola University Chicago School of Law ( email )

Chicago, IL 60611
United States
312-915-7152 (Phone)

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