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Florida Tax Review

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If you are or have been a student of federal income tax, chances are that you have studied Farid-Es-Sultaneh v. Commissioner, 160 F.2d 812 (2d Cir. 1947), a case addressing a wife’s tax basis in stock received under the terms of a prenuptial agreement. This opinion is included in most basic tax casebooks and is frequently cited by tax scholars and practitioners for the black letter principle that it espouses. Over the last year or so, I have embarked on an archaeology project of sorts, searching for the story behind the case. This article reflects the results of that journey.

The research project resulted in a rather surprising find, however. The facts placed before, and relied upon by, the courts in Farid were not the real facts. The facts as they actually occurred would have resulted in a completely different outcome! On a broader level, the lessons from this discrepancy have implications for many fields of legal study. These are discussed and analyzed in the article.

After describing the differences between the fictional version, which the lower and appellate courts relied upon in reaching a decision favorable to Ms. Farid, and the real version, the article explores the possible motives of counsel (for both sides) in stipulating to facts that were untrue. It concludes that strategic advantage probably induced them to agree to the facts. The article then considers the broader implications of counsel’s actions with respect to the disparity in the contexts of substantive tax law, litigation strategy generally and the constraints of the rules of lawyers’ ethics.



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