I have been teaching for a long time. It’s only been in recent years that I have felt relatively confident doing it. My methods have evolved to a level that I might actually be teaching somebody something. Instead of just listening to how brilliant I sound proving another hapless student wrong again. We all know that law professors are some of the smartest and worst asshole teachers ever to set foot in a classroom. They think that as long as students can’t win at “guess what I am thinking” they — the professor — must be brilliant. I must be really brilliant because my students don’t understand a word I am saying. What power!
Nowadays, I sometimes give my students a real life fact pattern along with my answer. By “my answer,” I mean my legal conclusions, not “the” answer. There is no “the” answer. Then I ask them to prove or disprove my answer. Here is one fact pattern I plan to use soon. It involves the settlement agreement between Donald Trump, ABC News and George Stephanopolous. Here is paragraph 1 of the Trump v. ABC and Stephanopoulos Settlement:
1. Contribution.
ABC shall cause a transfer in the amount of fifteen million U.S. dollars (USO $15,000,000) (the “Charitable Contribution”) to be made to a Presidential foundation and museum to be established by or for Plaintiff, as Presidents of the United States of America have established in the past, in full settlement and satisfaction of Plaintiffs Released Claims as defined in paragraph 5(A) of this Agreement. The Charitable Contribution shall be made by Defendants within 10 calendar days of the Effective Date of this Agreement to an escrow account to be established by Plaintiff’s counsel, who will serve as the escrow agent (the “Escrow Agent”) for this specific Charitable Contribution. Within 10 calendar days after Plaintiff or his counsel present written confirmation that the appropriate entity has been established by the Plaintiff, and its 501(c)(3) status has been recognized by the Internal Revenue Service, Defendants shall authorize the Escrow Agent in writing to release the Charitable Contribution to the subject entity.
The questions for this exercise are (1) may ABC take a charitable contribution deduction for the $15 million payment, (2) Will ABC’s payment qualify for a trade or business expense deduction? (3) Will Stephanopolous have income from ABC’s payment, and if so (4) can Stephanopolous take an unreimbursed employee business expense deduction?
I give the students a summary answer without citations. They have to go find the authorities to prove or disprove my answer. I want them to see how tax practice starts with a hypothesis and then proceeds to statute, regs, cases, and rulings. The goal is to convince them that they too can imagine an answer based on fundamental tax principles and then decide whether the answer is right or wrong. Because that is how tax lawyers should think. We can’t possibly memorize the entire tax code. We hypothesize and go confirm or deny the hypothesis. We can’t even begin to know where to look without an initial hypothesis.
I allow students to use artificial intelligence. Surely, they will use it in law practice in our Brave New World. As will be their ethical and professional responsibility, students will have to verify the results from their own minds. They will also need to know the right questions to ask ChatGpt or LexisAI. I view artificial intelligence as another tool practitioners should exploit, just like computers and cell phones. Anyway, here is the response from Lexis AI students must prove or disprove.
(1) ABC gets no charitable contribution deduction. (2) ABC gets a trade or business expense deduction if the primary purpose is to protect the business, but not to protect an employee from financial harm. ABC was a defendant too, of course, so that shouldn’t be hard to prove. (3) Lexis AI, citing Old Colony Trust, says George has income.
I am not sure that George should have income even if the computer thinks so. It certainly makes doctrinal sense that an employee has income when an employer pays his bills, but I don’t like that an agent performing work for a principal has income when the agent incurs a liability in the course of employment that is reimbursed by the principal. This is perhaps where human reasoning is superior to that of the computer. So here is my further non-artificial intelligence hypothesis:
George makes $18 million per year. Presumably ABC also provides him with personal liability insurance free of charge. Doctrinally, George has income from ABC’s payment of premiums for his liability insurance. Except that George should get an offsetting deduction for an unreimbursed employee business expense. If deductions for unreimbursed employee expenses were still a thing. He has income to the extent of the premiums, but he effectively pays the premiums as a cost of doing business.
And if the payout represents a gain from the insurance policy taxable to George, he should also get another offsetting deduction for an unreimbursed employee business expense equal to the amount of the payout. I know unreimbursed business expenses have been nixed by TCJA, but it is inappropriate that George would have an income tax liability for income “spent” to pay a liability not unusual to his occupation. Ultimately, George has received nothing for personal consumption.
darryll k. jones
