Stephen S. Ziegler - Page 6

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          Constitution.  Johnson v. Robison, 415 U.S. 361, 364-365 n.4                
          (1974); Hammond v. Lenfest, 398 F.2d 705, 709 n.6 (2d Cir. 1968).           
               Before considering petitioner’s constitutional arguments, we           
          shall summarize in pertinent part the legislative history and               
          provisions of section 469.  On October 22, 1986, Congress enacted           
          section 469 into the Code in the Tax Reform Act of 1986, Pub. L.            
          99-514 (1986 Act or TRA 1986), sec. 501(a), 100 Stat. 2233.  In             
          the report of the Senate Committee on Finance (Senate Finance               
          Committee Report) with respect to the 1986 Act, that committee              
          set forth the following reasons for enacting section 469:                   
                    In recent years, it has become increasingly clear                 
               that taxpayers are losing faith in the Federal income                  
               tax system.  This loss of confidence has resulted in                   
               large part from the interaction of two of the system’s                 
               principal features: its high marginal rates * * *, and                 
               the opportunities it provides for taxpayers to offset                  
               income from one source with tax shelter deductions and                 
               credits from another.                                                  
                    The prevalence of tax shelters in recent years                    
               * * * has been well documented. * * *                                  
                    Such patterns give rise to a number of undesirable                
               consequences, even aside from their effect in reducing                 
               Federal tax revenues.  Extensive shelter activity                      
               contributes to public concerns that the tax system is                  
               unfair, and to the belief that tax is paid only by the                 
               naive and the unsophisticated.  This, in turn, not only                
               undermines compliance, but encourages further expansion                
               of the tax shelter market, in many cases diverting                     
               investment capital from productive activities to those                 
               principally or exclusively serving tax avoidance goals.                
                    The committee believes that the most important                    
               sources of support for the Federal income tax system                   
               are the average citizens who simply report their income                
               (typically consisting predominantly of items such as                   
               salaries, wages, pensions, interest, and dividends) and                

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