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Abstract

My aim in this essay is to explore the foundations of the tax benefit notion. My strategy is simple, but it is probably best to state it explicitly at the outset. I begin with a straightforward and uncontroversial example of the application of the "inclusionary aspect" of the tax benefit rule. Using it as a paradigm, I try to discern why the law deems it appropriate to increase a taxpayer's taxable income. Next I examine the account of the tax benefit rule given by the Supreme Court in Hillsboro to see if it is consistent with the paradigm. I conclude that the results in Hillsboro are consistent, but that the rationale offered by the Court does not fully explain the principle. Along the way I suggest an analysis of the tax benefit principle that attempts to capture the notion exemplified by the paradigm. Throughout, my premise is a variant of the supposition that always underlies conceptual analysis: namely, that the features which characterize a principle in its simplest forms will also characterize it in more complex circumstances. My hope is that as extraneous factors are stripped away, we can more instructively begin to come to grips with the core concept underlying the tax benefit rule.

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