Timing is Everything: Shea Homes, Inc. v. Commissioner

In 1986, the Internal Revenue Code (“Tax Code”) was comprehensively revised for the first time in over thirty years as part of the Tax Reform Act of 1986 (“Act”). In enacting this comprehensive reform, Congress was guided by three overarching objectives: achieving fairness, improving efficiency, and striving for simplicity in the Tax Code. Before 1986, high-income taxpayers found ways to lower their effective tax rates through many tax shelters and loopholes in the Tax Code. As a result, many of these wealthy taxpayers were paying lower tax rates than their less affluent, low-income counterparts. With this perceived unfairness in mind, Congress consciously closed loopholes and eliminated tax shelters within the Act. While critics still remain, the 1986 reform accomplished its goal of increasing fairness by ensuring that taxpayers with similar amounts of income paid similar amounts of taxes