| Popis: |
In the increasingly common case where a faculty member accepts a buyout of tenure rights toward the end of his or her career, an interesting tax question arises. Does the relinquishment of tenure involve a “sale or exchange” of a capital asset, qualifying for long-term capital gains treatment? Or should the transaction be viewed as one generating ordinary income to “replace” normal compensation that would otherwise be received in the future? Tax Court dicta indicate that the compensation received should be reported as ordinary gross income. But statutory and judicial law effective since the Tax Court decision support an interpretation that some portion of the benefits constitute a payment for a property right, triggering capital gain treatment, a much more taxpayer-friendly result. An analogy to the capital gain result may be found elsewhere in the Code, suggesting the authors' position that the tenure buyout represents at least in part the payment for the exchange of an asset. |
