Tax Terrorism: Nasty Truths About Investor Control Theory and the Accommodation of Social Security Privatization

22 Pages Posted: 19 Sep 2006

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 privatization of Social Security could have promised profound challenges to the investor control doctrine (given the level of investor discretion anticipated). Revenue Ruling 2003-91 handily eliminates the apparently imminent conflict between longstanding, IRS-asserted doctrine and the demands of the political arena. One could argue that the pronouncement reflects little more than doctrinal evolution, but such evolution is a giant leap away from the twenty-two-year-old notion that investor discretion should be minimal and appears to be a doctrinal accommodation of potential Social Security privatization. This Article argues that the investor control doctrine should be dismissed. I further propose that investor discretion should be allowed with respect to the investment of contract assets, subject to (1) investment professional guidance or risk assessment, (2) age-sensitive adjustments with respect to the percentage of contract assets subject to investor discretion, and (3) limits with respect to the aggregate amount a taxpayer may invest in variable life insurance or variable annuity contracts.

Keywords: Investor Control, Social Security Privatization, Annuity, Variable Annuity, Privatization, Rev. Rul. 2003-91, Vertical Equity

Suggested Citation

Dexter, Bobby L., Tax Terrorism: Nasty Truths About Investor Control Theory and the Accommodation of Social Security Privatization. Mercer Law Review, Vol. 57, p. 553, 2006, Chapman University Law Research Paper No. 2007-07, Available at SSRN: https://ssrn.com/abstract=930290

Bobby L. Dexter (Contact Author)

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

One University Drive
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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