A Lawyer's Life Deep in the Heart of Taxes.

RELATED ARTICLE: Since the present-day tax code is so complicated, it is important to understand the process of coming to a decision on tax questions that the tax executive faces every day. Major changes to the 1954 tax code that eventually became the 1986 tax code can be traced to concepts (e.g., alternative minimum tax) introduced in the 1969 tax reform act. We are fortunate to have an account of the origin of those changes in the autobiography by Edwin Cohen.

Ed Cohen's career reached the highest levels of achievement in our profession. He has been a renowned professor of tax law at the University of Virginia; Assistant Secretary and later Under Secretary of the U.S. Treasury Department, thereby leading the nation's tax policy initiatives during 1969 through 1972; and an esteemed practitioner beginning at Sullivan & Cromwell, at his own firm, Root, Barrett, Cohen & Knapp, and finally after government service, at Covington & Burling in Washington, D.C. Ed Cohen has been involved in some of the most interesting tax policy issues in the last 60 years. He has personally provided the thinking behind the formulation of answers to tax policy questions by carefully laying out the analysis. His book is an inspiring story of character.

This fascinating book by a teaching exemplar will be inspiring and educational for both the experienced tax professional and the newcomer. Professor Cohen is, at heart, a teacher first, and for the many that have not had the privilege of being his student, this book reveals his teaching style. In a profession where learning never ends, this is a most welcomed opportunity and I recommend the book for the tax professional's library not just for the one-time reading, but as a reference over the years for ideas on how to approach very difficult tax problems.

Do not be led to believe that this is a dry, textbook discussion of tax issues. It is full of fun, quips, and poems by the author of "Ode to the Code," who is also a notorious punster. Ed Cohen shows us how to have fun in the practice of tax law-another lesson to be learned.'(Ode to the Code' is excerpted in this issue on page 48.)

In the early chapters, Ed Cohen describes his "initiation in government service" as the senior tax policy executive in the Nixon Administration. A list of his colleagues at the Treasury Department includes Jack Nolan, senior partner at Miller & Chevalier; Mike Graetz, who recently held top tax posts at Treasury before returning to Yale to teach tax law; Charly Walker, the long-time head of the American Council for Capital Formation; Buck Chapoton, Vinson & Elkins; Fred Hickman, Hopkins & Sutter; and Ernie Christian, Patton, Boggs & Blow. Ed Cohen provides a who's-who of the tax profession as he describes his life's experiences and his book includes a "Proper Name Index" for reference. The author's insightful descriptions of his relationships with these individuals will prove useful to the tax executive who consults and works with them; they also demonstrate how gracious gestures at the end of a heated discussion help build a better relationship.

The book opens with Ed Cohen briefing President Nixon on the 16 proposals that formed the core of the 1969 tax act. Originally, the summaries were to take about ten minutes or "less than 40 seconds per proposal." How often are we confronted with a similar task in briefing our companies'senior executives on complicated tax issues? Of course, Ed Cohen interested the President sufficiently in the proposals to find that he was allotted substantially more time than originally scheduled. There is a clear message here for tax executives facing similar challenges. Finding ways to have the listener seek more information about how the tax issue works and the merits of recommendations ultimately is the challenge. This is a much better approach than the 40-second explanation. Ed Cohen's dialogue in the book provides lessons worth reading.

In the "Contract with America," the current Republican-led Congress will discuss the 1995 neutral cost recovery proposal as it struggles with how best to stimulate investment and job creation. The author discusses earlier proposals for increased depreciation deductions (which led to the Asset Depreciation Range), the pros and cons of an investment tax credit, and the merits of tax-rate reduction. The taxation of capital gains plays a part here as well. In a later chapter, we learn of the author's handling of the amortization of network affiliation contracts and the eventual solution in the 1993 intangible asset legislation.

In Chapter 13, we are treated to an interesting history of the tax developments surrounding cash or deferred profit-sharing plans, now widely known as "401(k) plans." The author describes his work in the pension and profit-sharing area, including an episode involving an employee option to choose between a cash bonus or investment in a trust to be invested until retirement. The story describes what happened after the IRS New York District Office was reversed by the National Office and instructed to tax the payment into the trust and the trust investment income. The question turned on the nondiscrimination rules applying to employee plans. The deferred compensation question then deepens into a "constructive receipt" controversy and the court's holding against Roanoke Bank. Ed Cohen then discusses "Round Three" as employers provide their employees the option to reduce voluntarily their existing salaries and pay the amount into a retirement trust without a profit-sharing feature. Kodak and Xerox were two principal employers involved in this history and the author was consistently at the center of the many controversies. In the midst of the controversy, a moratorium was put in place eventually leading to the birth of section 401(k). Any tax executive actively involved in this area of practice will find this chapter well worth reading.

In the middle of the book (beginning with Chapter 25), Ed Cohen returns to the 1969 tax reform legislation and his years in the Treasury Department. The progress of the proposal through the Administration and Congress to reduce the charitable contribution deduction is one of the more illuminating stories of the tax legislative process. The 1969 tax act ended the special unlimited charitable contribution deduction for individuals. The President suggested, during a meeting, that up to half of an individual's taxable income should be allowed to be reduced by charitable contributions and the Congress enacted this quick response" of the President into law, and phased out the unlimited deduction. The author then turns to the question of donations of appreciated property which eventually tripped up the President in a personal tax problem and resulted in a criminal conviction of a presidential aide. The story is a fascinating account of the political process surrounding tax law. The author suggests that ultimately such problems can be avoided by "experienced, wise, and balanced" judgment. Not a bad prescription for dealing with difficult ethical problems.

The next chapter reveals the story behind changes in oil and gas depletion and intangible drilling costs and how the alternative minimum tax came into being as the way to prevent taxpayers from escaping income tax liability by using "preferences." A controversy over the proposals occurred between the Administration and then Congressman George Bush. The author points out that 20 years later George Bush obtained some tax benefits for oil and gas in the 1990 tax bill, which is a clear lesson: "If you want to change the tax law, get yourself elected President."

Other chapters relate the thinking and history to changes in private foundations and tax exempt organizations and the lowering of the 70-percent top tax rate on earned income to 50 percent, which is unfortunately where it is close to today. (In 1986 we benefitted from a further cut to 28 percent, which has since risen to an effective top rate in the 40-percent range.) It is probably worth reading these passages if just to get the idea that the new Congress (both Republican Dick Armey and Democrat Dick Gephardt are working on legislation) is on the right path in examining a "flat tax" proposal with a low rate. This may be the kind of Dick ... ens saga we should watch with great expectations over the next few months.

Ed Cohen completes his story with a number of experiences with the tax law during his practice in Washington, D.C. Each story relates to current issues, and we learn a great deal from the author's experiences. On the occasion of one of his many retirements, in this case after serving as the chairman of the United States Chamber of Commerce Taxation Committee, I had the opportunity to present to him a poster depicting an IBM trademark at the time, the Charlie Chaplin Personal Computer advertising symbol, which included the caption, "To Edwin S. Cohen, A Man of Considerable Stature." This book about his life's achievements, provides the backdrop for that caption. It is a story of a life "deep in the heart of taxes" worth emulating. It is a story of a tax professional's experiences worth reading and digesting. It is an incomparable story of the enjoyment in living with the complexities of our profession, succeeding in satisfying clients and building relationships, and thriving by an everlasting sense of humor. It is a refreshing look at how best to practice our trade.

Tax Analysts, the publisher of Tax Notes, is also the publisher of A Lawyer's Life Deep in the Heart of Taxes, by Edwin S. Cohen. To order a copy, call [phone] or write to Customer Service Department, Tax Analysts, 6830 N. Fairfax Drive, Arlington, VA 22213. The price is $34.95. Ontario would give up its sales tax. In return, the federal government would reduce its share of Personal Income Tax (PIT) so that the province could make up its lost sales tax revenue. Ontario would also be allowed greater control over its PIT base. In using this flexibility to meet our social and tax policy objectives, we would not create unnecessary complexities in the personal income tax system. The Zero-PST option would eliminate the burden of complying with two sales taxes while not introducing any new Ontario taxes.

Discussion about the best way to replace the GST is ongoing and other worthwhile options may be brought forward. I appreciate your taking the time to share your views on this important issue, as well as your willingness to provide assistance.