Abstract:
Income tax law generally taxes the results of legal
transactions rather than their underlying economic effect. The
courts often tell us that tax law does not tax on the basis of
economic equivalence. But the problem is deeper. In order to
make income tax work at all, the law must make a number of
assumptions that are not in fact correct, assumptions as to
both the factual and the legal nature of the taxpayer’s income.
The effect of these assumptions is that the base that the law
taxes becomes removed from the facts of the case.
