Murphy - or are lawyers natural contortionists?

[LPC]

Yeah, but what I was thinking about with respect to "imputed income" when I wrote that response was something that was discussed in a tax class in law school, and I still can't remember what the specific topic was.

When I was in law school, there was a specific proposal (perhaps part of TRA '76, but I think after that) to tax the imputed rental income of owner-occupied residences.

I don't remember whether it was discussed at the time, but I now see a real constitutional issue with such a tax on imputed rental value, because one thing we *know* about the meaning of "direct tax" is that it includes a tax on the value of real property. A tax on the rental value of a home, without any actual transaction on which to impose an excise or duty, strikes me as a "direct tax" on the mere ownership of the property, which is a direct tax.

At least with imputed interest on bonds (i.e., original issue discount and market discount) and below-market loans, there is a transaction upon which to impose an excise. I really don't see how occupying your own property can qualify as an excise.

[Florida]

Florida wrote:

Imputed income in general, however, is not of only theoretical interest. It has arisen in a number of actual cases, which is why, I assume, you narrowed your statement to rent or mortgages.

Yeah, but what I was thinking about with respect to "imputed income" when I wrote that response was something that was discussed in a tax class in law school, and I still can't remember what the specific topic was.

That's ok. If you find the syllabus, let me know.

[Paul]

My response to everyone who argues for taxing the imputed rental income on owner-occupied housing is: OK, then why not tax the imputed sub-rental income of lessor-occupied housing?

[Cpt Banjo]

My response to everyone who argues for taxing the imputed rental income on owner-occupied housing is: OK, then why not tax the imputed sub-rental income of lessor-occupied housing?

Why stop there? The logic of taxing imputed rental income on owner-occupied housing would also lead to the taxation of the imputed rental value of all property one owns -- cars, lawn mowers, TV's, computers, you name it. You could even impute interest income on the cash one carries around in a wallet or purse or the nest egg stuck in a mattress.

[natty]

A capital investment is not deductible. Personal living expenses are not deductible. Therefore, all personal living expenses are capital investments?

You invented a syllogism that I never said.

Actually, you did. You just can't recognize it as such.

If you want a syllogism, it is this: All after tax dollars become capital. Personal living expenses are paid with after tax dollars. Therefore, personal living expenses are paid with capital.

Well, there you go, you said it again. A capital investment is not deductible. Personal living expenses are not deductible. Therefore, all personal living expenses are capital investments.

You don't seem to understand that saying "an expense is paid with after-tax dollars" is the same as saying "the expense is not deductible.

What does "deductibility" have to do with anything other than your intent to obfuscate, mr. lawyer?

And the major premise of your syllogism is wrong. The word "capital" can have a number of different meanings in economics, accounting, and finance, but "all after tax dollars" is not one of those meanings.

I said "all after tax dollars BECOME capital". Would it be more clear to say "capital" includes all after tax dollars?

You had implied by your question that personal living expenses were not capital investments.

That's because they're not.

Why? Because you say so?
Money spent on education could be considered a personal living expense and an investment spent on yourself.
Eating steak instead of beans is a personal living expense that could be considered an investment spent on yourself.

[LPC]

The word "capital" can have a number of different meanings in economics, accounting, and finance, but "all after tax dollars" is not one of those meanings.

I said "all after tax dollars BECOME capital".

Now you seem to have trouble with the word "become." *WHY* do "all after tax dollars" BECOME "capital"? Just because you say so?

Would it be more clear to say "capital" includes all after tax dollars?

Repeating the same erroneous statement in a different form does not make it any more correct. I'm not saying that your *wording* is wrong, I'm saying that your *meaning* is wrong.

You had implied by your question that personal living expenses were not capital investments.

That's because they're not.

Why? Because you say so?

Because personal living expenses don't fit any meaning of "capital" I've ever seen.

The usual definition of "capital" is an investment in an income producing asset. Personal living expenses are not an investment, don't produce income, and there is no asset.

And it's your proposition, and not mine, so the burden of proof is on you. Provide a definition of "capital" and explain how all personal living expenses fit into the definition.

Money spent on education could be considered a personal living expense and an investment spent on yourself.

Even a blind pig finds an occasional acorn, and you might have finally stumbled onto a combination of words that actually make some sense.

Now, how would you apply that principle to the facts of the Murphy decision? How much of the money she spent on her education was included in the recovery for "emotional distress" and damage to her "vocational reputation"? I can't see how her educational costs have anything whatsoever do with those damages, because none of the knowledge she acquired in her education was damaged in any way.

Eating steak instead of beans is a personal living expense that could be considered an investment spent on yourself.

It could also be considered consumption.

[Quixote]

Now you seem to have trouble with the word "become." *WHY* do "all after tax dollars" BECOME "capital"? Just because you say so?

natty wrote:

Would it be more clear to say "capital" includes all after tax dollars?

Repeating the same erroneous statement in a different form does not make it any more correct. I'm not saying that your *wording* is wrong, I'm saying that your *meaning* is wrong.

4. the wealth, whether in money or property, owned or employed in business by an individual, firm, corporation, etc.
5. an accumulated stock of such wealth.
6. any form of wealth employed or capable of being employed in the production of more wealth.

dictionary.com

Are you both using capital as defined in 6? If so, money is capital. That does not imply, as Natty seems to contend, that anything purchased with money is capital.

[natty]

4. the wealth, whether in money or property, owned or employed in business by an individual, firm, corporation, etc.
5. an accumulated stock of such wealth.
6. any form of wealth employed or capable of being employed in the production of more wealth.

dictionary.com

Are you both using capital as defined in 6? If so, money is capital. That does not imply, as Natty seems to contend, that anything purchased with money is capital.

How about 8?

8.any source of profit, advantage, power, etc.; asset: His indefatigable drive is his greatest capital.
(dictionary.com)

I contend that the money, assets, anything of value or capital that you spend on yourself is an INVESTMENT in yourself and form the BASIS of your HUMAN CAPITAL.

[SteveSy]

Now you seem to have trouble with the word "become." *WHY* do "all after tax dollars" BECOME "capital"? Just because you say so?

natty wrote:

Would it be more clear to say "capital" includes all after tax dollars?

Repeating the same erroneous statement in a different form does not make it any more correct. I'm not saying that your *wording* is wrong, I'm saying that your *meaning* is wrong.

4. the wealth, whether in money or property, owned or employed in business by an individual, firm, corporation, etc.
5. an accumulated stock of such wealth.
6. any form of wealth employed or capable of being employed in the production of more wealth.

dictionary.com

Are you both using capital as defined in 6? If so, money is capital. That does not imply, as Natty seems to contend, that anything purchased with money is capital.

Then please explain why all transactions are calculated as income. For instance I trade 6 chickens worth $6 for one pig worth $12. I have, according to tax gurus, an income of $6.

If my chickens were paid for with "after" tax dollars aren't they my capital? If I paid for feed for the chickens isn't that capital? If the chickens consume the feed isn't it still a capital investment?

Would it be fair to say the chicken trader has $6 in income if he spent $6 in feed for his chickens and the pig consumed its food from the local grass land?

I have never understood how anyone can logically accept the "basis" baloney and what is or is not "capital" when it relates to humans investing their self. It appears to me no one has a logical response except to say "the law says". No one can reasonably explain why an investment in humans is a legitimate capital expense as long as that human isn't yourself. If income cannot be defined by congress then that implies that congress cannot define an expense not to be an expense when it is to create an expanded definition of income.

Please do not respond with "the law says". We're talking about making your arguments work logically while keeping one foot firmly planted in reality.

Remember Murphy is more about the constitution not what's in the law books. The constitution trumps the IRC, anything within the IRC must be assumed to be limited to the confines of the powers and rules described in the constitution.

[Famspear]

SteveSy wrote:

Please do not respond with "the law says". We're talking about making your arguments work logically while keeping one foot firmly planted in reality.

Here we go again. YOU may be talking about "making your arguments work logically." MOST of us here are talking about the law, and we use the logic of legal discourse, not the "logic" of SteveSy. If you want to keep "one foot firmly planted in reality," then you better abandon your idiosyncratic "SteveSy" logic and concentrate on "what the law says."

--Famspear

[natty]

from dictionary.com
Human Capital

A measure of the economic value of an employee's skill set. This measure builds on the basic production input of labor measure where all labor is thought to be equal. The concept of human capital recognizes that not all labor is equal and that the quality of employees can be improved by investing in them. The education, experience and abilities of an employee have an economic value for employers and for the economy as a whole.

Investopedia Commentary

Economist Theodore Schultz invented the term in the 1960s to reflect the value of our human capacities. He believed human capital was like any other type of capital it could be invested in through education, training and enhanced benefits that will lead to an improvement in the quality and level of production.

Related Links

The Hidden Value Of Intangibles

And the measure of the value of human capital is not limited to just tangible things. See the link to "The Hidden Value of Intangibles".

[Famspear]

SteveSy wrote:

Remember Murphy is more about the constitution not what's in the law books. The constitution trumps the IRC, anything within the IRC must be assumed to be limited to the confines of the powers and rules described in the constitution.

Yeah, well, the court in Murphy, like the court in Penn Mutual, has now pointed out that under the Constitution there is no requirement that something actually "be" income in order for Congress to validly CALL it income and TAX it as though it were income. The courts are right.

--Famspear

[SteveSy]

SteveSy wrote:

Please do not respond with "the law says". We're talking about making your arguments work logically while keeping one foot firmly planted in reality.

Here we go again. YOU may be talking about "making your arguments work logically." MOST of us here are talking about the law, and we use the logic of legal discourse, not the "logic" of SteveSy. If you want to keep "one foot firmly planted in reality," then you better abandon your idiosyncratic "SteveSy" logic and concentrate on "what the law says."

--Famspear

So you believe what congress says trumps the constitution?

[SteveSy]

SteveSy wrote:

Remember Murphy is more about the constitution not what's in the law books. The constitution trumps the IRC, anything within the IRC must be assumed to be limited to the confines of the powers and rules described in the constitution.

Yeah, well, the court in Murphy, like the court in Penn Mutual, has now pointed out that under the Constitution there is no requirement that something actually "be" income in order for Congress to validly CALL it income and TAX it as though it were income. The courts are right.

--Famspear

And you find that acceptable?

btw, you realize accepting what your wrote means that the 16th then allows for a excise tax on anything including real and personal property. Also, assuming most of you are right, congress always had the power to tax "income" with an excise, even without the 16th. Therefore that means congress always had the power to tax real property with an excise.

[Nikki]

Natty:

With respect to your definitions above, who made the investment in the EMPLOYEE'S education, etc?

Following that, to whom does the "Human Capital" intangible asset belong?

[Famspear]

SteveSy wrote:

I have never understood how anyone can logically accept the "basis" baloney and what is or is not "capital" when it relates to humans investing their self. It appears to me no one has a logical response except to say "the law says".

Call it a personality flaw of mine, but when studying the law on "tax basis," I pretty much accept the law itself as being the law, regardless of whether Steve refers to it as "basis baloney."

Steve's statement that "no one has a logical response except to say 'the law says'" is almost too ironic for me to come up with a satirical response. Steve, have you considered writing comedy for living?

[Famspear]

SteveSy wrote:

And you find that acceptable?

Answer: Yes, I accept the statements in Penn Mutual and Murphy as both authoritative statements of what the law is AND as perfectly logical in my own little idiosyncratic way.

Steve also wrote:

btw, you realize accepting what your [sic] wrote means that the 16th then allows for a excise tax on anything including real and personal property

No, Steve, that's probably wrong. I suppose someone might that the expansive language of Murphy could mean that if Congress can tax something, under ARTICLE I, that is not income by simply CALLING it income, Congress could impose a property tax without apportionment simply by calling it an excise or indirect tax (specifically, an income tax). I think LPC may have addressed an aspect of this earlier.

I don't read Murphy (or Penn Mutual) as applying that broadly. Under current case law, a tax on property BY REASON OF ITS OWNERSHIP (whether realty or personalty) would probably still be considered a direct tax, not an excise.

--Famspear

[SteveSy]

SteveSy wrote:

I have never understood how anyone can logically accept the "basis" baloney and what is or is not "capital" when it relates to humans investing their self. It appears to me no one has a logical response except to say "the law says".

Call it a personality flaw of mine, but when studying the law on "tax basis," I pretty much accept the law itself as being the law, regardless of whether Steve refers to it as "basis baloney."

Steve's statement that "no one has a logical response except to say 'the law says'" is almost too ironic for me to come up with a satirical response. Steve, have you considered writing comedy for living?

Please answer the question; I know you hate to give up your tool to alter reality. You're like a religious fanatic being confronted with facts and their response always results in "it's a matter of faith".

Does congress have the power to trump the constitution with legislation?

[Imalawman]

SteveSy wrote:

I have never understood how anyone can logically accept the "basis" baloney and what is or is not "capital" when it relates to humans investing their self. It appears to me no one has a logical response except to say "the law says".

Call it a personality flaw of mine, but when studying the law on "tax basis," I pretty much accept the law itself as being the law, regardless of whether Steve refers to it as "basis baloney."

Steve's statement that "no one has a logical response except to say 'the law says'" is almost too ironic for me to come up with a satirical response. Steve, have you considered writing comedy for living?

Seems like there is a difference between arguing over what the law ought to be and what the law is. Both are perfectly valid and can be logical. But what's absurd is to argue that human capital works within the confines of the law as it is now structured. I believe that the law is correct and logical. Steve can argue otherwise, that is fine. But I would agree that its illogical to assert human capital fits within the statutory schema that is in place now.

For Natty and Stevie, What is the difference between an expense and capitalized cost? If you assert that you have a basis in human capital, should one be able to amortize those costs? If so, over what period of time?

[SteveSy]

I don't read Murphy (or Penn Mutual) as applying that broadly. Under current case law, a tax on property BY REASON OF ITS OWNERSHIP (whether realty or personalty) would probably still be considered a direct tax, not an excise.

--Famspear

But you said:

[T]hat under the Constitution there is no requirement that something actually "be" income in order for Congress to validly CALL it income and TAX it as though it were income. The courts are right.

So you're taking that back I take it.

I fail to see where you have given any indication of what can or can not be taxed as income. It's kind of impossible to argue a point when you've given such a vague understanding of what income is.