Tax Loopholes & Aggressive Tax Planning, with Andrew Gradman
Why do tax loopholes exist? Why do certain tax laws seem unfair? In this episode of I Know a Lawyer, I speak with Andrew Gradman, a tax attorney with GradmanTax.com. Andrew is a brilliant tax attorney who deals with income tax planning. In this episode we discuss:
Four unavoidable constraints that result in unfair tax laws. (01:26)
Four traits of the aggressive tax lawyer. (06:13) How should risk assessment play a role in tax law? (07:57)
Is informed consent for risky tax positions possible? (14:27)
Malpractice standards for the tax attorney (17:32)
Tax lawyer banter! (19:00)
Thank you to Andrew Gradman for joining me on this episode. If you have questions about income tax planning, or need legal guidance relating to income tax planning, contact Andrew at GradmanTax.com. Thank you for listening to a couple of tax lawyers!
This podcast is brought to you by McKenna Brink Signorotti LLP.
Transcript
Ryan Lockhart (00:01):
Welcome to, I Know a Lawyer, the podcast with a couple of lawyers talking about a legal topic in hopefully easy to understand ways. I'm your host, Ryan Lockhart. And this podcast is brought to you by McKenna Brink Signorotti LLP, a boutique law firm in Walnut Creek, California. Check us out at mckennabrink.com to find out how we can help you. So let's talk about tax loopholes today. Everyone has heard the term tax loophole and do they really exist? Joining me today to discuss this topic is Andrew Gradman a tax attorney in Southern California and principle of Gradman tax. How are you doing today, Andrew? Good. Thanks for having me on. All right, so let's talk about loopholes. What do you got?
Andrew Gradman (00:38):
All right. Let's jump right into it. The timing of, of having me on your show is good because I was putting together a presentation on the very subject that you're about to hear. So let me speak at length for awhile. And then we'll talk about it when we're done inspired by the title of your podcast. I know a lawyer, I wanted to talk about your, and my favorite phrase since we're both tax lawyers, which is, I know a loophole like it's New York city variant, I know a shortcut. I know a loophole has a special mystique in our culture. In fact, as a law student, more than a dozen years ago, I took the intro to tax class simply because I wanted to know why are there loopholes in tax, but not in physics? Why can't a pilot say he's going to get you to Chicago in half the distance, but a tax lawyer can.
Andrew Gradman (01:26):
So today I'm going to try and answer that question for anyone else who has it. It turns out though that any question about loopholes is actually impossible to answer because the term doesn't have any meaning. The only people who use it are non tax professionals. As professor Heather Field puts it. The term has become the tax law equivalent of calling someone a loser empty schoolyard name calling. So instead, I'm going to try to get to the intuition behind your question by answering two related questions. First, why can't we make a tax law, which everyone thinks is fair. And second, what's so special about the lawyers who deal in tax saving transactions. To the first question, people will always find the tax law unfair because of four unavoidable constraints, constraint. Number one, people don't like paying taxes. So the more tax you impose, the more you distort people's behavior, it's sort of like a Heisenberg uncertainty principle for tax law constraint.
Andrew Gradman (02:25):
Number two politics. The next time some Senator advocates for shutting down a loophole. The question you should ask is not whether they're creating a new loophole, but what is that new loophole? And this is the trade off worth it. Constraint. Number three, the longer you tolerate a state of affairs, the harder it is to change it. The technical term for that is path dependence. A lot of problematic features in our tax code were not inevitable, but they became entrenched over time. Or a speaker suggests for example, that when treasury identifies a really problematic loophole, Treasury's best strategy may be to stay silent and do nothing. Because if it publicly requests legislation to fill the loophole, fix the loopholes, that will cause it, that will call attention to it. And if treasury tries to discourage people from taking advantage of the loophole, by announcing that it doesn't work, Congress may refuse to act in my own experience.
Andrew Gradman (03:22):
I've also seen a case where treasury announced why it thought the loophole doesn't work. And I didn't find those arguments persuasive leading me to write an article in the LA daily journal saying that if treasury had any better arguments, it would have made them. So it must not have any. And the transaction must work constraint. Number four, the challenge of measuring income to tax income, precisely the IRS would need to gather unbelievable amounts of data to the point of reading minds. This problem is actually discussed seriously in tax scholarship. Imagine two young soldiers, they're both paid. They're both paid the same salary, but one becomes a foot soldier while the other becomes a bodyguard to the King. And this leads to three differences. First I'm like the foot soldier, the bodyguard doesn't have to pay for necessity. So he saves more money. Second, the body guard enjoys the same food as the King and third, adding a twist.
Andrew Gradman (04:17):
Imagine that both the foot soldier and the bodyguard agree that it's actually more desirable to be a foot soldier. This is based on a famous thought experiment called Kleinwachter's conundrum. And it highlights how the value of consumption differs depending on whether that consumption is chosen or imposed. And depending on whether it's something you like or dislike. Now, the outcome of these specific facts is now governed by internal revenue code section one, 19, which says that the bodyguard will not be taxed on his food and lodging because they were provided for the convenience of the employer. But in law school, we're taught not to confuse a rule for a solution. And in fact, there is no solution to this problem. So that's my answer to the first question. Why can't we make a tax law, which everyone thinks is fair. However, I think many of you have something narrower in mind when you hear the word loophole, you're thinking of cases where wealthier taxpayers get better results because of their access to better lawyers.
Andrew Gradman (05:17):
And so the second question I'm asking is what is so special about the loophole lawyers? Is it that they're especially clever and they're sitting on some esoteric insights that other lawyers lack? In my opinion, no, I personally don't think that these loopholes are based on cleverness. I think at the tax code, like a playbook in football. Sure. It's lengthy and detailed, but knowing all the important details in that playbook, doesn't make you a better lawyer. It's a prerequisite for going out in the field in the first place. What distinguishes a good ballplayer is? How hard do they practice? How athletic are they? How well do they work in a team? And what distinguishes a good lawyer is, is she taking the time to learn? What are your goals and concerns? Is she reading your documents carefully? Is she asking good follow up questions? No. What I think distinguishes the loophole lawyers is that they're aggressive.
Andrew Gradman (06:13):
And I think the aggressive tax lawyer has four traits. First, he has a low respect for the IRS employees who will be auditing the case. I know we've all seen audits, open and close where the auditor misses something obvious, but I try not to generalize from those examples. People are overworked and all walks of life. Sometimes you get lucky from my own experience as a former federal prosecutor, working with law enforcement agents, I have to say that if your case gets to a government employee who is not overworked and who makes you their priority, you're in a lot of trouble. And on top of that, the IRS has another thing going for them. Something that in the military, they call interior lines. You as a tax lawyer, only ever interface with one adversary, the IRS, but the IRS is interfacing with every single tax payer simultaneously.
Andrew Gradman (07:05):
So to beat them, you don't just have to be smarter than them. You have to be smarter than all the other taxpayers they've audited and learned from here's. The second trait that distinguishes the aggressive lawyer. He is good at getting clients to accept risky positions. Now I'm good at getting clients to understand risky positions, but once I'm done with that, the client tends not to accept them. I remember once I wrote a memo to a client, identifying all the risks of the transaction, and I told him only you can decide whether to embrace these risks. And he said, what would you do if you were in my shoes? And I said, your shoes, I can't even afford your shoes. So he took my memo to another lawyer who got him to move forward with it. The truth is that is a skill I lack. And it's a skill I really don't want.
Andrew Gradman (07:57):
I justify my feelings by this quote from the California Supreme court, where research reveals less risky alternatives. An attorney has a duty to avoid involving the client in murky areas of the law. At least the client should inform the client of the uncertainties and let the client make the decision where the client is capable of doing. So you hear that where the client is capable of doing so when is a client capable of evaluating the likelihood of a legal outcome in tax? They can't, that's why they come to us. I mean, I guess I could tell the client, if you pursue this path, there's a 60% chance you'll succeed. But with the audit rate, so low on what data am I basing statements like that. And how representative is the data that we even have. There's an important case called Weber v Commissioner, where the key question was to the taxpayer exert control over the investments owned by a life insurance policy and the court held yes, siding among other things more than 70,000 emails among the policy holders advisors concerning these investment recommendations.
Andrew Gradman (09:03):
So what should we learn from this one case? Is it as an aggressive lawyer might say that some smaller number of emails would have been okay. I don't think so. I tend to think of this as a test case, the IRS shows these extraordinary facts so that it could focus its attention on establishing law. Meaning that in the next case I expect it will be more aggressive with the facts. The truth is, but the truth is none of us knows. This is my theory, but there's nothing in the four corners of the opinion that tells us the most important piece of information about this case, which is why did the IRS choose to make an example out of this one to avoid these headaches? I generally try to avoid getting myself and the client into these kinds of uncertain positions. And I do that by only running plays, which are in the playbook things which are pretty close to a hundred percent.
Andrew Gradman (09:53):
They're not a lot of home runs in the playbook, but there are plenty of singles and some doubles, third aggressive lawyers understand what they're worth. That's why these loopholes are only accessible to the rich. Not because only the rich can afford them. It's because only the rich owe a lot of taxes. The more they owe, the more they're going to save, the more they're going to save, the more that's available to pay the lawyer. And at the moment the lawyers bill arrives the clients in a generous mood because they're playing with found money. And in the end, it's the government that's paying. And here's the final trait of the aggressive lawyer. This is what professor Brett Bogan Schneider describes as quote, the manufacturer of effectual indeterminacy. For example, suppose you're dealing with a legal test that turns on the taxpayer's subjective intent. In these cases, the contribution made by an aggressive tax lawyer might be to emphasize the helpful evidence while minimizing the unhelpful evidence.
Andrew Gradman (10:48):
What bothers me about this practice is that there's a very fine line between trying to document something that you believe exists and starting to counterfeit something that you don't believe exists. It's the same as the slippery slope between refusing to say anything you don't believe is true to being willing to say anything that you're capable of staying with a straight face. So in other words, why are they aggressive lawyers? Because they know they can get away with it. So in conclusion, if I could go back a dozen years and say something to myself, as I was signing up for that intro to tax class back in 2008, I'd say you're taking the right class for the wrong reasons. Get over the loophole thing, the tax law obeys, the laws of physics. It's just video game physics, but the tax universe has a need for engineers and architects. Like you please come on over and start building something useful.
Ryan Lockhart (11:38):
That's awesome. I really like how you broke it down as aggressive tax lawyers and the traits of aggressive tax lawyers, because obviously as a fellow tax lawyer, I know some other tax attorneys who, you know, are able to, or willing to take that what I call the audit lottery, right? That's what I tell clients like how much risk do you want to take on? Cause you're kind of playing the audit lottery and are we able to really justify it? I am like you in that. Cause I do more estate tax planning where I'm aggressive in certain respects, but more in a hundred percent type of range. And we'll get conservative on certain issues, especially with dealing with life insurance. Cause there's really established law on what you can and can't do on those. But so I just want to come back to this aggressive loophole and aggressive tax lawyer.
Ryan Lockhart (12:25):
I have a quick question on that. Especially like when, let me back up actually to constraint number three, you said the path dependence. That was pretty interesting for me because this idea that if the treasury identifies an issue or a loophole by them simply calling attention to it, now people are like, Oh wait, they're actually looking at that. Maybe that's a pretty good law. And in the example you gave of how their, when their arguments weren't persuasive, that they probably didn't have any other arguments. Because if they're going to take that opportunity to put some arguments out there, they're going to do the best they can to really shut that down. Right. So I think that's really interesting that maybe they should just be silent on that. And I think this is where it kind of falls back where you get these people who think, Oh, there's all these loopholes in the tax code. And one of the ones I don't even know about, right? So one of my fears,
Andrew Gradman (13:12):
That's perfect, you know, that comes from this 1972 Boris Becker article. And he goes into it some more length about this, where he says that there is a rumor that treasury, this is 1972 is holding onto a list of loopholes. And you know, he's saying that they, that they gather them. It must be sort of like Fort Knox where they can't let anyone in or out. But it was all speculative. We don't know this, at least he didn't know this writing the article. I think it's you know, sometimes you can drive these things to be true. I'm sure it is true.
Ryan Lockhart (13:43):
I had, or if they do have a list of loopholes, they don't want people to really know about that might be worth more than Fort Knox right there, depending on these taxes that are out there, especially for some of the high wealthy individuals, they would love to try to go after some loopholes that they don't even know.
Andrew Gradman (13:56):
I also hear that the patent office has a perpetual motion machine, a working one, and that's why they never accept applications. Cause they don't want any competition.
Ryan Lockhart (14:03):
I know some patent lawyers that are probably interested in hearing about that too. Yeah. So going back to the aggressive, the aggressive tax lawyers what do you, what do you do when you have clients who come in and say, I want to be as aggressive as possible on this. There's gotta be something out there in the tax code that you can tell me that I can use. Give me like specific advice on those types of clients.
Andrew Gradman (14:27):
I think that's subjective. I think it's lawyer by lawyer. And I I'll tell you my answer, which is that it's the most conservative possible, which is I have not yet learned how to document their consent in an effective way because they may think that they think that, but they may not realize what it means until they're caught. And then when they're caught, they're like, you know, the analogy I want to keep coming back to that in my mind is, is to a informed consent. My, my father is a surgeon and I, I spent a lot of time proofreading these things and I, you know, there's a long list of elements that you listed in informed consent. And it's a pretty interesting, but it's important to keep in mind that that's a different tort that they're dealing with. They're, they're dealing with the tort of battery and an unwanted touching is a battery, but if it's consented to, it's not a battery.
Andrew Gradman (15:16):
So my understanding is that they have a different, that you have the ability to waive that professional malpractice. So it's just a completely different question. I guess it comes down to professional standards. If a client comes in and says, just the things you described, you know what, my first I saw I've expressed what I would say, which is, you know, go to another lawyer. It's not even like a non ethical, it's just like, I don't know how to get you to sign enough documents to protect me. I guess for someone in the middle, the answer that more common answer in our profession is to educate them and make sure, you know, the case I've been from is called, I think it's called Smith V Irwin, the Supreme court case. I like that it has like three different holdings in two sentences. One is, which is never, you know, you have a duty to not do things that are, you know, in the law and then, or you have a duty to get informed consent and then, or there's no such thing as informed consent if the client can't consent. So it's the two sentences two of two sentences, three lawyers. So that,
Ryan Lockhart (16:24):
Yeah, it just kinda brings it back to what you said under the second trait about you're good at getting clients to understand those risky positions. And that's where I come down to is I want them to at least understand these positions and kind of how they can go well, how they can go really badly. And I think if they, if I can at least convey that information to them and they understand the positions well enough to make an informed decision, then I've done my job for the most part. Now, if they want to go press me and say, Hey, let's just go all forward. Then it's about more about my comfort level and saying, you know, maybe it's time for you to go talk to somebody else because I'm not going to put myself out there and there's not, like you said, there's not enough documents in the world.
Ryan Lockhart (17:02):
That's going to be able to cover me if we're going to, you know, this is where circular 230 come into. I love talking to other non tax lawyers. And they're like, what is this circular 230 I see on people's emails and, you know, just kind of briefly explaining it how it can be some like real penalties against the tax lawyer for taking these, you know, really outlandish positions. So there to be a, you know, big checkbook behind you to be able to, you know, help justify putting yourself on the limb like that. So that's always interesting.
Andrew Gradman (17:32):
I think it's important that you took the conversation to the client coming in and expressing a willingness to take risks. That's something I didn't give adequate space to in my presentation, which is, you know, just looking in economic terms, people have different tastes for risk and we've represented some of those represented like big corporations where I think of it as like we have zero taste for risk. We just want to take a position that we know won't be changed so that we can put it on our sec filings. And then on the opposite side, it's, it's people who maybe are just dismissive of legality and you know, and that's, those tastes, I guess, should be respected because we only represent the client. We don't, we don't make the decisions for them. So it's a good point you raise.
Ryan Lockhart (18:12):
Yeah. And then of course you'll get the occasional sovereign citizen or tax objector coming through. Those are always interesting conversations. I get those, I mean, all these once, every couple of years here too, I don't know if you've ever dealt with any of them,
Andrew Gradman (18:26):
Them as a prosecutor and I've dealt with them as a court clerk and I don't want to deal with them anymore.
Ryan Lockhart (18:31):
You talk about unreasonable positions there. Yeah. Good. So one of the follow up question I have, for sure it was the likelihood of a legal outcome. I know I get this question a lot, even when I'm trying to convey, and we're talking about these different positions or cause when I, when I do estate tax planning, I'm pretty much using tried and true methods, right? Like these are, like you said, close to a hundred percent. There might be occasional situations where we're, maybe something's a little bit kind of farther on the riskier side, but not really that risky. And I definitely get this. And when I get the questions about income tax, which I don't deal with a lot, but I know you do is how do I save taxes on income taxes? And what's the likelihood of this outcome. Can you just give me a little bit more on, on how you kind of deal with those situations about the likelihood of outcome and just expand on what you said earlier?
Andrew Gradman (19:23):
Yeah. So I expressed skepticism about the idea of being able to convey numbers to clients. And I feel like it's sort of still a partially formed thought in my head, but I feel like there's something important about saying like, what do we mean when we even say that? Because if, if to go back to the surgical analogy the treatment of cancer going forward is going to be a lot like the pre treatment of cancer, going back, someone when the doctor says you have a 30% chance of this or that happening, he's looking at a huge number of data from the past. And he's allowed to say that the data going forward will look a lot like the old data in the past. And I don't see us having access to that kind of information. You know, I realized that when you say to someone there's a 40% chance, like the reality is you're probably seeing eye to eye in the sense that it conjures some colorful intuition that like you can picture running across a highway.
Andrew Gradman (20:18):
And like, if you do it 10 times you'll die for, and people can kind of get like, Oh, I don't want it. That had to happen. And you can sort of get across it, intuition that way, but the real content of it, it's like, I want to repeat what I said. First of all, audits are so rare. Those are the data we have and they hardly ever happened. And then if we have a pool of data, there's some form of adverse or strange selection where the IRS is selecting stuff. That's not representative, at least the things that we hear about in the cases and stuff isn't representative of the pools. So it, it, it's really kind of embarrassing that, what do you think, am I overboard when I say this?
Ryan Lockhart (20:55):
No, no. I agree with you because the whole audit, right? There's not a lot of data on that. They don't happen that often. And it almost seems like it's a dart at a dartboard type of choosing mechanism, I guess, rumor that has some algorithm out there that just randomly picked some of them. I know on the estate tax side, I have heard from pretty decent sources that pretty much. So I think almost all the estate tax returns go to Cincinnati office and that if it's above like a certain number of close to that taxable estate level, or definitely above taxable estate level that there are at least an eyeball that's going to hit that return in some form. It might be a one minute Passover, something like that. So obviously that's a different situation, but on the income tax side, it just seems so random and rare trying to quantify that for the clients actually really hard.
Andrew Gradman (21:43):
And let me, let me repeat or elaborate on something earlier, which was the comment about, you know, ultimately the standard we're held to is a malpractice standard, which is the reasonable perspective in our field, which is it's circular, it's recursive, doesn't have any content. And that's great. I mean, there's that famous case where the attorney screwed up the rule against perpetuities and that led to damages by the client and the client sued for malpractice and lost because the judge said, attorneys don't actually know that rule. And it's really inspiring for us because you could say 60, 40, you don't have to be right. It just, is it the standard in your profession to make up that particular number as a reasonable? Nice, it's really nice.
Ryan Lockhart (22:23):
It is nice because quite frankly, if we were held to a higher standard, I would, I wouldn't say anything about it. I'd be like, it's going to be up to you. I can't give you any information on this because there's just no data to back me up on it. So good luck.
Andrew Gradman (22:37):
And this has taken me back to law school that we read this book, legal magic by Jerome Frank, or maybe that was Frankfurter and Durham Frankfurt courts on trial, man, those through my brain through a loop, like if it's upsetting to think about the idea that there's no content and it's all circular that malpractice is circular, et cetera, then, then stay away from those books. Cause they will, they will make you nauseous. Yeah,
Ryan Lockhart (22:59):
Probably the less I know the better on this one. Yeah. yeah. Realism legal realism
Andrew Gradman (23:06):
Sounds so quaint when you say realism like, Oh, realism is nice, but it's like Kabbalah. It's like they say, you don't study it until you're 50. It's Judaism references
Ryan Lockhart (23:15):
Started swimming yourself around in the head, right? Like what are they talking about? You made me, you reminded me like when you went through the, your Kleinwachter's with the foot soldier and the, and the bodyguard. It's funny. Cause I, I was in the military before, so I remember it was kind of a very similar situation. There were people who were had duties with situations almost like the body, right? Like doing something for a general where they got like this really nice, you know, they got better food, they got this kind of stuff, but it was funny. Cause it was, we used to complain that like, why are we all treated the same? Because they're getting something better than we are, but we're treated the same everywhere else. Like as far as, you know taxes or anything like that. So that just thought that was really,
Andrew Gradman (23:56):
Yeah. When people get ranfom, I'm curious, stepping away from tax, when people get random assignments like to the Pentagon just by the stroke of luck, does that affect their lives? Do those people tend to have like career better career futures?
Ryan Lockhart (24:09):
You know, I, I think it probably does affect a decent amount of them cause so I was stationed in Germany once and it was like the headquarters of us air forces in Europe. And I knew, I knew people who were personally tasked to like a four star general and they flew on the private jet with them everywhere. And that literally turned them into like a career. They made that a career and they were not going to make that a career until they got such a sweet assignment. That's why we called it a sweet assignment. So I think that when you get to the Pentagon, something like that, cause I do, I have another person I knew that was in the Pentagon doing duty there and it absolutely turned into a career for him. He just got out of the military and did the same exact job he was in counter-intelligence. So just got out and worked for a contractor doing the exact same job. So I think it does impact people and influence their decisions. Nice. So why don't you tell the audience a little bit about your practice? I know there's some differences between us, so I'm kind of curious to how you would lay out your, your practice at Gradman tax.
Andrew Gradman (25:10):
Yeah. I've dabbled in a lot of things over the years and finally decided to build a practice based on my hobbies. And it's, it's limited to A to Z and so non tax lawyers, that sounds like a lot, but I'm referring to sub chapters here of the of chapter one of subtitle, a title 26. So income tax only planning. I I love fine print. I look back to my experience as a court clerk as informing how I approach you know, you know, what the best way to understand it is you got an, I am, I'm a record setting, a Wikipedia editor. And long before I became a tax lawyer, I created a thousand articles truly in Wikipedia, including the Kleinwachter's conundrum article. I created that one. And then when I became a tax lawyer, I was like, I'm going to take that same.
Andrew Gradman (26:03):
It was a funny word for it now. I can't think of it that same malignancy and and to make it into a career. And so I a lot of research memos, if I can do texts opinions without without regretting it, I do that sub chapter K sub chapter, you know, corporate tax. I love the fun stuff, like a tight methods of timing in a week. I'm going to give a presentation in provisors, which is our networking group. I'm going to give a present presentation on installment method of accounting. I have worked with a state tax planning, which I know is, is the area that you are deeper in. And I, I find it to be too hard. I can't, I can't, I can't do it. I can't even learn it.
Ryan Lockhart (26:44):
It's interesting. We were talking about this before and I'm the complete opposite. I think estate tax is easier than income, but that's great because that just shows that there's people who find different areas of the tax code.
Andrew Gradman (26:55):
Let me tell you why. You know, I think the law is the law and you can learn the law, but you need to. So I work in two dimensions, everyone who comes to me wants to get richer. Some of the people who come to you don't want to get richer. They want to get poor. And like, you can't just assume anything. They're like, they want to impoverish themselves to make their kids rich or for charity. And you have to be so much more thoughtful. You have to mix your legal advice with like what they actually want. And for that matter, you're also planning so much further ahead, I'm planning one or two years ahead. You have to make a projection, you know, when you do estate planning and it's like 20 years in the future and make commitments today which are irrevocable. And I just find that to be a daunting.
Ryan Lockhart (27:41):
Yep. So I have parents give up assets, their kids, but I you're right. I have to back them off of sometimes giving too much away. You know, I'm like, let's be very conservative on cashflow for you projecting out because I never want to create a situation where parents have to go back to their kids and ask for money back. That's just a recipe for disaster. And you're right. It's funny, you brought up rule against perpetuities and that one context, cause I just talked to somebody today about rule against perpetuities when I was going over their trust with them, because I do create these dynasty trusts that are going to go as long as, you know, the law will allow them to go and trying to explain rule against perpetuities to really anybody is difficult enough. Cause I know that's always a scar on almost every lawyer's psyche from law school about when they had to go over RAP.
Andrew Gradman (28:27):
Well, like I said, it'll take you 10 hours to learn the rule or one hour to learn the rule that you don't need to know the rule. And we're very reassuring.
Ryan Lockhart (28:35):
That's part. That's what I tell them. I say, look, it's going to be basically this many years in the future and you can be long gone. So don't worry.
Andrew Gradman (28:40):
Yeah. Like, yeah, you'll be long gone. You know, that's the format to me is that we're providing
Ryan Lockhart (28:46):
Kids, grandkids, and probably great grandkids is that'll probably go that long and if there's anything left, but yeah, that's pretty good. So if a client wanted to reach out to you to get tapped into some of your expertise what's the best way for them to get ahold of you
Andrew Gradman (29:02):
Www.Gradmantax.Com andrew@gradmantax.com. Those would be good ways. Awesome question. Yeah. That is the question.
Ryan Lockhart (29:08):
No, that's the question I want to make sure they know how to get a hold of you. There will be a link to Andrew's website in the show notes. So click on that, check them out. Obviously he's a very much an expert in what he's talking about. Andrew, I guess one final question is if there's any area of the income tax code, those chapters, you just said, what's kind of like a, is there an issue that you wish you could just take to court? Like you wished you could just take it to court? Cause you think there's a good opportunity to change the law, how it is written today with a good court opinion.
Andrew Gradman (29:38):
Wow. That's a difficult question to improvise. Oh, can I share you something genuinely? Interesting. Yeah, go for it. I got interested in the law in the intersection between law and transgender studies through a very circuitous route that when the cares act was passed, they made some changes to how HSS are treated. And I had this question in my mind. How do we determine when does the IRS get to question medical advice of a doctor in determining whether there's a medical care deduction and it turns out only one case has ever been decided on the subject called O'Donnell Bain v Commissioner in 2010. And it was where a person who was seeking sex reassignment surgery obtained surgery and the IRS questioned it. And it led to a decision by 16 judges, six opinions and all of them different and I think all wrong.
Andrew Gradman (30:29):
So that's, I'm, I'm sort of half done written writing this article. It's hard for me to articulate my view, but I just, I just think, you know, in this podcast setting, but I think it's just so interesting to know that in the history of the deduction for medical care deductions, I mean we've had cases where people like go to a church and they want to claim that's the medical care deduction, but the government says you, you knew that wasn't medicine, you had something else in mind. Whereas this is the only time and it was for the transects of gender reassignment surgery. But I want to say, I want to just sort of dissect those opinions and figure out why it was so messy.
Ryan Lockhart (31:07):
Well that's well, that's good. That pretty much answered my question right there. That's a unique issue that, yeah, there's only been one case and how'd that one turned out if you don't know
Andrew Gradman (31:15):
The taxpayer won. But, and, and they keep referring to it a majority opinion, but it was eight out of 16. So there was no majority and there was no common argument re rationale because they won in, in not the best way because they won with the holding, being that we're going to scrutinize these IRS excuse me, scrutinize these physicians and determine whether we kind of agree with their science. Now, judge Holmes. In a, I guess a minority said we don't scrutinize forget scrutinized. If they're wearing a lab coat, you know, we listened to them and I think that's probably the best answer. So it was kind of a Pyrrhic victory. But it's, but it's unclear cause there's no majority
Ryan Lockhart (31:56):
IRS, an attorney or an a judges. Yeah. They're not really equipped to kind of make those medical question, medical determinations anyways, they should just default to the doctor. That's what I think, but I didn't dive into, obviously we were like, you did just hear about it today for the first time.
Andrew Gradman (32:11):
Yeah. Awesome. The question.
Ryan Lockhart (32:14):
Thank you, Andrew. I had a great time talking about this and tax loopholes, like we both did our tax journey, so we get these questions. Just it's one of those buzz words that you hear about, you know, various places I would say we'd hear about it. Like, you know, parties or something you might go to, people ask you whenever they hear your a tax lawyer. I'm sure they always have questions for you. Like they do me. We'll get to have a, you know, social events. I guess one day in the future. But thank you for joining me today. Any final takeaways,
Andrew Gradman (32:41):
Thanks for having me on your podcast. It's a great thing you're doing and I'm good luck with your next few shows with your next shows.
Ryan Lockhart (32:47):
Thank you very much. Thank you everybody. That was Andrew Gradman of Gradman Tax. You can check him out at gradmantax.com. Check out the link in the show notes. I'm Ryan Lockhart, so hope you enjoyed this talk with a couple of tax lawyers. Obviously we enjoy talking about this stuff, but I think it also imparted a lot of good knowledge on, on you, the listener and just things you can think about when you do go to, you know, engage with the tax attorney in the future. So thank you very much, Andrew. Again. this is, I know a lawyer take care of everybody and stay cool in his hot summer in California. Bye bye.