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What Matters in Moore (Avi-Yonah)

What Matters in Moore by Reuven S. Avi-Yonah published by Tax Notes International (12/2024).

Why does the pending Moore1 case in the Supreme Court matter? The obvious answer is that if the Court decides that realization is a constitutional requirement for an income tax, the holding will have significant implications for the existing income tax regime. Depending on how broad the decision is, it could enable constitutional challenges to subpart F, the global intangible low-taxed income regime, partnership and subchapter S taxation, and sections 275, 877A, 1256, and 1259, to name just a few. And even if most or all of these challenges are ultimately decided against the taxpayers (for example, because realization does not apply to corporate taxpayers, because partnership taxation is just about aggregation, because subchapter S is generally elective, and because the other sections mentioned above are excise, not income, taxes), this will take time. Meanwhile, taxpayers would rely on Moore as substantial authority and not pay tax on a lot of income.

But this column will focus not on Moore’s collateral damage but on the impact the holding could have on future legislative change. Specifically, the reason the Court took the case is because a holding that realization is constitutionally required would prevent Congress from enacting a mark-to-market tax on billionaires, as proposed by the Biden administration and by Senate Finance Committee Chair Ron Wyden, D-Ore.

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