I’m sitting in my Tax Accounting class. The professors (there are two) explain things. Some of the students ask questions. The professors respond. They are speaking in sentences. They seem to be having a meaningful exchange of information, but I can’t follow it for the life of me.
I don’t know if it’s because they’re speaking in jargony jarglejarg, or if the underlying concepts are actually difficult. A little of both? Sometimes the “relation words” they use imply that the connections between these concepts are straightforward, but what on earth are they talking about?
I can’t visualize this stuff easily. If you tell me somebody buys a company, and the seller indemnifies the buyer, I already have to stop and draw a diagram to remember who is who. This doesn’t happen to me often, but . . . I don’t understand, and I don’t understand how other people understand. Trying to parse just one sentence the professor says would take me a minute or two—it’s not long before I’m completely lost.
I did take the basic Federal Income Tax class last semester, but I’ve never taken any kind of Accounting class. And of course I’ve never been involved in any complex financial transaction or made enough money to have an interesting tax return. Maybe that has something to do with it? But I am smart. I pick things up quickly. Not everything, I guess.
The frustrating thing is that I can’t tell if I’m anywhere close to understanding, or if I’m hopeless. I wish someone who (1) understood this stuff, (2) comprehended how dumb I am about finance, and (3) had a math brain could explain this to me.
Here, I’ll transcribe for a while, so you can get a sense of the language. If this makes perfect sense to you, then maybe you are my magic 1+2+3 explainer person.
Concurrent with the $500k that’s royalty income, you get to claim a percentage depletion, and that gives you a tax percentage rate on the tax coming in. So we need to find you a deduction on the tax you paid in the earlier year so that your give-back is exactly the same, or you’ve been over-compensated.
And so the Court looks to the policy arguments and says, “If we don’t do this, you’re going to get a double deduction.” Now the dissent makes much of the fact that 1341 was Congress’s reply to these kinds of questions, and they didn’t choose to deal with tax preference items in 1341. But the court blows through that and says that 1341 isn’t the only place we deal with transactional parity, it’s just one example. And the dissent has great fun with that, but the majority says no, we are not going to believe that Congress intended to create something that says no, you have no net benefit.
So even though this isn’t covered by 1341, we’re going to say that $500k needs to be a deduction at 72% of the $500k. Why? Because we need to grind down the percentage depletion deduction. And the policy reason for that is on p. 517, that the Court simply does not want a double deduction situation to occur.
See what I mean? If you went through and replaced all the nouns, these paragraphs would make plenty of sense. But as they are, to me, they’re gobbledygook. Comprehensibility feels so close, but so far away.
When I signed up for my first tax class, I thought it would be fun because tax is all about math and lots of fiddly rules. I like math, and I like fiddly rules: slam dunk. Not so. It’s about words, and not in the way that I like words. It feels like a bunch of English majors trying to rederive freshman physics, but without equations. And then they have to use it to build an aircraft carrier. And the damn thing floats, but fuck if I can figure out how. You know?