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April 09, 2013 The Tax Lawyer

Nationwide Uniformity and the Common Law of Federal Taxation

Vol. 66, No. 1 - Fall 2012

Jasper L. Cummings, Jr.


    This Article presents a set of principal contentions about the creation of federal common law and then applies those contentions to a current issue in federal taxation. These are the principal contentions:

(1) Federal common law is principally the result of the interpretation and construction of federal statutes, combined with fact finding.

(2) When federal common law cannot be informed by traditional statutory interpretation, construction, and fact finding, and a gap to be filled in the federal law can be filled by available state law, the default rule is that federal courts adopt that state law, despite any resulting lack of uniformity of the application of the federal law in the 50 states.

(3) There is no doctrine in Supreme Court (Court) jurisprudence preferring nationwide uniform rules to fill such gaps.

(4) However, the Court will generate such federal common law, which may mean simply rejecting the incorporation into federal common law of one state’s rules, when federal law and congressional intent would be wholly stymied by reliance on the aberrant state law.

    These contentions apply to the alter ego concept, which the Service would have the federal courts define as a positive rule of federal law to aid in collecting one person’s taxes from another person’s property. Their application shows the following:

(1) There is no federal common law of alter ego, tax or otherwise.

(2) Instead of creating any such common law, federal courts have employed a variety of methods of fact finding and statutory interpretation and construction to hold property nominally titled to other persons to be liable for a taxpayer’s taxes.

(3) Many of these methods are state common law and statutory methods, such as piercing the corporate veil and determinations of agency.

(4) Using the variety of such state methods available to federal courts in federal tax collection cases will not stymie federal tax collection.

(5) The Court should not create a federal common law of alter ego, for tax collection purposes or otherwise.

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