Monday, August 11, 2014


In discussing “tax inversions” President Obama recently said -

You have accountants going to some big corporations — multinational corporations but that are clearly U.S.-based and have the bulk of their operations in the United States — and these accountants are saying, you know what, we found a great loophole — if you just flip your citizenship to another country, even though it’s just a paper transaction, we think we can get you out of paying a whole bunch of taxes.

Well, it’s not fair. It’s not right.”  

It may not be fair – but there is nothing wrong, illegal, immoral, or unethical with an accountant or tax professional telling a client “we found a great loophole”. 

Here is another quote, from Judge Learned Hand’s decision in Commissioner v. Newman, 159 F2d 848 (1947) (the highlights are mine) -

Over and over again courts have said that there is nothing sinister in so arranging one's affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant.”

Judge Hand also wrote that a taxpayer -"is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one's taxes.”

Here is another quote, this one from me –

Hey, BO, if the idiots in Congress create, or allow, a tax loophole accountants, and taxpayers, have a perfect legal right to take advantage of it, whether or not it is ‘appropriate’ or should exist in the first place.”

I do not believe that the Earned Income Credit and the various tax benefits for higher education should be in the Tax Code.  Government social welfare programs should not be distributed via the Form 1040.  It’s not right.

But this does not mean that I will not claim the Earned Income Credit, education tax benefits, the residential energy credit, etc. for a qualifying client.  If I did not claim these credits and deductions for qualifying clients I would not be doing my job properly.  

If there is something wrong with the Tax Code do not blame the accountant or tax professional.  We have a moral and ethical responsibility to bring to our clients’ attention all the legal deductions, credits, loopholes, techniques, and strategies that are available to reduce their federal and state tax liabilities to the least possible amounts.

The fault lies clearly with the idiots in Congress.  Accountants and tax professionals do not write the Tax Code.  The idiots in Congress do.

So Mr. President, if you think something in the Tax Code is “not fair” or “not right” don’t “shoot the messenger”.  Tell the idiots in Congress to fix it. 


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