Tax Terrorism: Nasty Truths About Investor Control Theory and the Accommodation of Social Security Privatization
22 Pages Posted: 19 Sep 2006
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: Suggested Citation