Collapsible Corporations Under the Tax Reform Act of 1986, 35 Cleveland State Law Review 1 (1986)
In 1982, the American Law Institute described the collapsible corporation
rules, set out in § 341, as "characterized by a pathological degree
of complexity, vagueness and uncertainty." Four years later, it became
possible to augment this description by saying that § 341 became triply
anomalous with the enactment of the Tax Reform Act of 1986. First, as a
tax avoidance device, the collapsible corporation rested on a tax rule that
was repealed in 1986. Second, § 341 was nevertheless preserved virtually
intact by the 1986 Act; indeed, its reach was slightly expanded.
Third, the punitive remedy employed by § 341 to discourage the use of
collapsible corporations became, at most, a slap on the wrist. Thus, the first and second anomalies are neutralized, rather than multiplied, by the
Date of Authorship for this Version
Bittker, Boris I., "Collapsible Corporations Under the Tax Reform Act of 1986" (1986). Faculty Scholarship Series. Paper 2308.