Recommendations for Amendments to the Internal Revenue Code Section General 31(a)(2) 34 243 34(b)(2) 1 Attention should be given to eliminating disparities in treatment between residents of community property states and other states. In this connection, consideration should be given to such problems as hobby losses, attribution rules, exploration expenditures for other than gas or oil, exclusion for earned income outside the United States, capital losses. 2 Taxpayers on a fiscal year basis should be permitted to claim credit for the actual withholdings made by their employers during that taxpayer's fiscal year. As the law now stands, a taxpayer on a fiscal year ending June 30, 1958 does not get credit for the withholdings in the first half of the calendar year until his subsequent taxable year. 3 Short dividends should be offset against long dividends on the same security in figuring the dividend credit to eliminate the existing loophole and tax reduction from being long and short at the same time. It should be made clear that for purposes of the limitation, taxable income includes capital gains even where the alternative tax is used. Section 37(c)(1) 5 Persons under 65 years of age, who receive pensions from private or industrial retirement systems, should be permitted the retirement income credit just as persons retired under a public retirement system. 1 37(g) 61 61 In computing earned income of partners and individuals in business, reference is made to section 911(b), which in turn refers to 30% of the "profits." The meaning of the term profits should be clarified. It might mean all taxable income, or income from certain classified sources, or all earnings and profits. 7 Averaging of income for individuals should be permitted along the lines of plans previously submitted by the Institute (Hearings before the Committee on Ways and Means, House of Representatives, 83rd Congress, First Session, on Forty Topics Pertaining to the General Revision of the Internal Revenue Code, p. 595), or along the lines of H. R. 126 (85th Congress). 8 Expenses of moving for the convenience of the employer when paid or reimbursed by the employer should not be included in the employee's gross income for either new or old employees. 61 It should be made clear that gross income does not include receipts or accruals from others as reimbursement for expenses except to the extent that the reimbursement is compensation in whole or in part for services or use of capital. Section 10 62(2)(D) 15:(e)(1)(A) 152(a)(9) This provision, relating to trade or business expenses, should apply to all outside representatives of an employer rather than just salesmen. 11 The elimination of the $600 gross income test in the case of certain children as dependents should be expanded to cover all dependents, as long as the other tests of the law are met. In any event, a person, otherwise a dependent, who is 65 years of age or over and whose gross income is less than $1,200, should qualify as a dependent. 12 It should be made clear in the statute that the spouse of a taxpayer can not be treated as a dependent of the taxpayer. 13 161 The Code should affirmatively provide for the amortization of bond issue costs, license costs, franchise costs, and other like intangibles. 162 164(d) 14 Without prejudice to existing situations, expenses incurred to defeat or promote legislation should be deductible if the purposes therefor and the methods used do not violate federal or state laws and the expenses are otherwise deductible under section 162. 15 Apportionment should apply to any property taxes which are prorated in the terms of sale. Section 16 164(d) 164(d) The apportionment of taxes should apply not only to sales but also to other dispositions, such as exchanges. 17 This provision should be extended to apply to successive sales of the same property during the real property tax year. 18 164(d) 165(c)(3) 165(e) 165(g)(1) This provision should be extended to cover taxes paid or accrued prior to a sale in respect to a real property tax year subsequent to the sale. 19 A taxpayer should not be forced to make an election on the treatment of casualty losses at the time of filing the estate tax return. There should be a free election to deduct such losses for either estate or income tax purposes (but not both), and the taxpayer should have the right to make a change in election at any time during the statutory period. 20 The loss should be allowed in either the year of theft or the year of discovery at the election of the taxpayer. Otherwise, the taxpayer may, as a result of the theft, have no taxable income in the year of discovery, and might even be insolvent at the time. 21 It should be made clear that the deduction for worthlessness is independent of the possible workings of section 267 where the securities involved are those of a related taxpayer. (This correspondingly applies to section 166 (d) (1) (B).) Section 165(g)(3) 22 The percentage of ownership test should be reduced to 80% to conform with the consolidated return affiliated group requirements. 166(d) 166(d)(2) 166(f) 167 167 167 23 The Code should define business bad debts to include all losses from debts originating in a transaction entered into for profit. 24 The transferee of a business-acquired debt should be able to treat the debt as a business debt, regardless of the business circumstances of his own acquisition. 25 The difference between a bad debt to the lender and to a guarantor should be eliminated. 26 Goodwill, trademarks, trade names, secret processes and formulas and other like intangibles should be amortizable over a stated period to be fixed by statute or over a demonstrable useful life, whichever is less, to the extent such items are not otherwise treated under other sections of the Code. 27 Leasehold improvements should be depreciable regardless of whether the estimated useful life is longer or shorter than the term of the lease. 28 It should be made clear that the correction of a factor in the depreciation computation is not a change in method requiring permission. |