Fun With Taxes

Burke's scholarship, teaching add
excitement to supposedly dry topic

By Erika Fredrickson

When Martin Burke says that tax law is fun, you assume he’s one sandwich short of a picnic. Or that he’s the anemic, sour, tight-laced tax guy you see portrayed on television sitcoms. But the UM law professor, who teaches the ins and outs of tax law, doesn’t fit that stereotype. He is a gregarious sort and a man who laughs easily and with joy. He appears eager to prove that the “nothing is certain but death and taxes” quote shouldn’t be said with so much grave cynicism — at least not the taxes part. Tax, he notes, is not an evil. At its best, a tax system is a necessary part of what makes for a good society.

Still. Fun?

To prove his point, Burke opens up a hefty, serious-looking textbook called “Taxation of Individual Income,” which he co-wrote with Michael K. Friel of the University of Florida College of Law. He reads from it a surprisingly humorous tax story about the country-western singer Conway Twitty.

Twitty, who was perhaps best known for the 1970 hit “Hello Darlin,” opened a burger business called Twitty Burger in 1968. Some of Twitty’s country musician friends, including Merle Haggard, invested in Twitty Burger. But when Twitty Burger went belly-up, Twitty felt that he owed his good friends their money back. And he wanted to be able to deduct those repayments from his taxes. This wasn’t about friendship, Twitty testified. It was about preserving the Conway Twitty name brand as the honest, stand-up guy he portrayed in his songs.

“The question is,” says Burke, “can he do that? He was actually under no legal obligation to repay his investors.”

The story goes that the judge ruled in favor of deducting the repayments. The judge closed his opinion with an “Ode to Conway Twitty,” which included these lines: “Twitty Burger went belly up/ But Conway remained true/ He repaid his investors, one and all/It was the moral thing to do.../ Under the unique facts of this case/Held: The deductions are allowed.”

Not to be outdone, the IRS wrote their own poem, which said:

“He repaid his friends /Why did he act /Was it business or friendship
Which is fact? /Business, the court held/ It’s deductible, they feel /We disagree with the answer /But let’s not appeal.”

“Real life is much more interesting than fiction,” Burke said. “And the tax law has a lot of real-life examples like this that are amazing.”

When people are young, they want to be an astronaut or an actor or a doctor or even a lawyer, but they don’t want to go into tax law. Burke is no exception. “I would never in a million years have dreamed that I would spend my career teaching tax,” he says.

He studied political science and Italian at Gonzaga University, and from 1968 to 1969, his junior year, he studied abroad in Florence, Italy. He recalls the effect the city had on him — the way it still magnificently captured the Renaissance.

“To walk the streets every day and realize some of the greatest artists and civic leaders had walked those streets, to be in a place that is truly cosmopolitan with people from all over the world, was transformative,” he says. “We’re all citizens of the world, and living in Florence really brought that home
for me.”

Burke attended the UM School of Law. He envisioned himself as a trial attorney, and he clerked for Judge William J. Jameson, a federal judge. Working with Jameson, he researched a number of tax-shelter cases that he found intriguing. After clerking, he worked for Crowley, Haughey, Hanson, Toole and Dietrich in Billings and discovered just how pervasive tax issues are.

“I found myself working on transactions and realizing there was a tax dimension to every one of them,” he says.

He started teaching classes focused on wills, trusts and estates at UM — a course which implicates the tax law. A few years later he took a leave of absence to get an advanced law degree in tax at New York University, which was at the time the premier tax-law school.

“And so I did that and then ended up staying on at NYU teaching tax,” he says. “I returned to UM and started teaching exclusively in the tax field. And so my engagement with the tax law was something that I came to after focusing on areas of the law other than tax.”

Burke has taught many tax law courses over the years: corporate tax, federal individual income tax, nonprofit organizations, partnership tax and taxation of property transactions. Burke digs below the surface of those dry terms to find fascinating elements of tax law. He asks his students seemingly simple questions like, “What is income?”

“One might assume that’s an obvious question with an obvious answer,” he says. “But, for example, what if someone enters into a barter arrangement? I provide you legal services; you provide me services. Is there gross income? Or what if someone wrote a check to you on Dec. 31 at 7 p.m. to pay you for services rendered. Do you have income at the moment when you receive that check even though the banks are closed and you can’t cash it? Or do you have income the next year?”

Beyond hypotheticals, Burke wants his students to understand how prevalent tax issues will be no matter what area of law they end up in. For instance, he says, if you’re a trial lawyer representing a client in an automobile accident or a wrongful discharge action, the client needs to know whether any settlement or judgment received will be taxable.

“Your client wants to know ‘What am I going to have for myself, after I pay your fee and both federal and state taxes?’ As a lawyer, you need to have an answer for the client.”

That sort of practical application is no doubt important to Burke. And the quirky anecdotes, such as the Conway Twitty ode, add color to tax law history. But sitting with Burke over a cup of coffee, you get a sense that tax law means more than that to him, and it doesn’t take long for him to explain why. Tax laws aren’t just rules that we follow, he says, but indications of what we, as a society, believe is important. Tax law, for instance, allows us to be more selective in how we support art, environment, health and other areas, which is especially applicable in a place such as Missoula that bursts with nonprofits.

“You can reduce your income taxes by contributing to nonprofits,” Burke says. “So you get to decide, in effect, how tax dollars will be used. Our tax law could be written to say there will be no charitable deductions and that the government or state will in effect decide which charitable entities survive and which don’t. Instead, we get to decide that. So if I make a check out to (the UM) Foundation, I get to decide that there will be more student scholarships. If I write a check out to the Missoula Art Museum, I’m saying I want the museum to continue its work. The public policy dimension of the charitable deduction is important. I want our students to be aware of it.”

In this light, it’s easy to see that Burke is the same man who walked the streets of Italy years ago admiring creative minds and civic duty.

“We live in a country that has said the American Dream involves home ownership,” he says. “And to encourage home ownership we have a range of tax incentives.”

But the picture isn’t all roses and apple pie, and Burke isn’t afraid to ask his students to ponder the darker side of taxes in terms of public policy. People often use home equity to take big vacations or buy a new car — and the tax law accommodates that by allowing deductions of interest on home equity loans. Which sounds great. But is it?

“I raise the question to my students,” Burke says. “Doesn’t that encourage consumption?”

Another issue to ponder: Federal tax law permits interest to be deducted on housing acquisition debt up to $1 million, which can be split between two homes.

“A million-dollar home in Montana is quite a home, right?” Burke says, smiling. “Should the government be subsidizing a person who purchases a million-dollar home? Should the government be subsidizing someone who acquires two residences? It’s an interesting question.”

Like the Socrates of tax law, Burke follows one question with another, hoping to get his students to think critically about the world. Tax is pervasive, he says. It’s at the forefront of political campaigns. It’s behind every economic decision, local and beyond. And Burke has his own concerns about the state of the world. The current trend in politics that denies any positive role of taxes in society ruffles him.

“I’m very concerned about the state of affairs,” he says. “For the last few decades we have seen virtually 99 percent of people running for public office saying we need to reduce taxes; it’s become the mantra. The gap between what people expect the government to do and what people are willing to pay for it is getting greater and greater. But take natural disasters. When Katrina happened what did we hear again and again on the news: ‘Where’s the government?’ The BP oil spill: ‘Where’s the government?’ We expect government to be there when we need it, but that costs something.

“Taxes are viewed as evil, and they aren’t that at all,” he adds. “Here we are at a public university. Tax dollars support this university. Question: Can we afford to have public universities? The other side of that question is: Can we afford not to?”

Last spring, Burke received a standing ovation from his students on his final day of class as a full-time law professor. Now partly retired, he intends to write a book. Not a technical book full of rules and historical footnotes, of course, but one with humor and amazing real-life tax stories. Fun stories, that he hopes will inspire people to think seriously about the world in which we live.

“It’s very important for our students to start thinking about public policy because they as lawyers will be people influential in their communities and states,” he says. “None of this is carved in stone. Tax law is written today, erased tomorrow. So who makes the tax law? Well, we make the law. And in many cases law students will play a significant role in that.”

For more information, email jmartin.burke@mso.umt.edu.

Next >