"I Think I Can, I Think I Can"

I too am at the mid-point in my law school career. As with most things in life, sometimes it feels like the time has flown and other times I can't even remember life before law school. One thing is certain, the longer I am a law student the more I am aware that, echoing Kelly here, "Law school is both about learning how to think AND ACT like a lawyer." I want to focus on the acting part and go in a slightly different direction . . .

First year I denied all of life around me and did nothing but hit, hit, hit the books. I was non-stop, focused, in the zone, and it was all-consuming. That was exactly the right tack to take. First year grades are so critical, you only get one shot, and you are laying the foundation for years to come. However, as second year rolled around I decided that I had to find a way to occasionally work life (family & friends) around being a law student. My law degree will not grow old and gray with me, in 60 years it will not sit next to me on the porch and talk as the sun sets on the years of my life. I have a sneaking suspicion that if we do not learn now as law students how to have a healthy balance, once we become lawyers and our Blackberries are blowing up every other second we will not be well-positioned to find the balance then. These are critical learning years in more ways than one.

Now, over Christmas break, I am faced with three substantial legal projects: a comment, an appellate brief, and a source check. This is an opportunity to build legal muscles. It's preparation for managing a multiple-case load, each with different but converging deadlines. This could be daunting, and to some degree it is, but even more so it's challenging and exhilarating. This is where the rubber meets the road and we find out that we really have been developing legal skills. We really do know how to digest and analyze complex legal problems. We really do know how to construct and draft briefs. Like the little engine that could ("I think I can, I think I can") we realize that we really are becoming lawyers.

We are learning how to think and act like lawyers.

Class is Money

Another term is over; for my fellow 2Ls and I, this marks the half way point of our law school career. This semester has highlighted for me the true value of regular class attendance. Aside from the obvious point – learning the material – attending class is worthwhile for reasons that last beyond the confines of the semester. Job opportunities depend upon class rank, class rank depends upon grades and grades are completely dependent upon exam performance. Professors give tips to enhance exam performance in class; regular class attendance improves the odds of picking up these tips. While enhanced exam performance should be incentive enough, the real benefits of class attendance last long beyond exams.

Law school is about learning how to think and act like a lawyer. Timeliness, preparedness and decorum are essential to professional life; class attendance and in-class performance simply reinforce these habits. This includes the ethical motivation: we owe ourselves and our future our best, and that obligation begins in class. Furthermore, our professors are lawyers. The more time spent listening to, emulating and interacting with our professor-lawyer-mentors, the better equipped we will be to handle issues we will likely encounter in practice. We can hope that the more successful we are in our practices, the more lucrative our careers will be.

For a less lofty and more pragmatic reason to attend class, consider this. Each class hour costs about $50 tuition dollars.* Some may consider this a sunk-cost. The price of admission has been paid in advance so the choice to attend class on a particular day ought not to be affected by a previous investment decision. This reasoning, while comforting for those who choose not to attend class, is flawed. The investment decisions (to pay tuition; to attend class) are not unrelated. Return on a student’s tuition investment is affected, positively or negatively, by the student’s decision to attend or not attend class. There’s really no way around it, attending class affects each student’s ultimate bottom line.

*Estimated using the following: $15K tuition per semester, 15 credit hours, 16 week semester, 80% of tuition.

Merry Christmas from Red Lion Reports

God Bless Us, Every One.

Instalink for Marie

Congrats to Marie for getting an instalink from Glenn Reynolds for her post on It's A Wonderful Life. The only problem is the link is to Moneylaw and not this blog...

Bad Debt Deduction = Good Tax Policy

In her post below on the Mortgage Forgiveness Debt Relief Act of 2007, Marie wonders why the revenue loss wasn’t paid for by denying the bad debt deduction to the lenders for debt forgiveness excluded under the Act.

There are several good reasons why that would have been a very bad idea. First, a primary goal of our tax system is to measure (and tax) net income. These lenders have lost real money on these transactions and thus general tax policy supports the allowance of deduction for that loss. Denying the deduction as a stick to penalize the lenders further is not an appropriate use of our tax system.

There are instances where we have determined other policy goals trump a more accurate measurement of net income (for example, the general realization requirement). Perhaps this is another one of those situations, the policy of penalizing the “bad” lenders trumps allowing a deduction for money that is truly lost. In the end, this argument does not hold up. First, we know that not every lender out there holding the subprime bag engaged in deceitful practices so the penalty would be overbroad. Second, many lenders don’t even hold the loans anymore. They were sold to someone else who had no connection to the original loan. Unless we want to say that we should penalize people for even investing in this market, the denial of the deduction would not be affecting the “bad” people. Personally, I wouldn’t deny the deduction for anyone (even if we know they engaged in deceitful behavior) since again I don't believe the tax system is the appropriate tool for that but an overbroad denial would penalize many people with no connection whatsoever to the practices that many are now complaining about.

Another reason that denial of the deduction is bad policy is it would discourage lenders (or those who hold the debt) from forgiving the loans. Marie could probably tell us why there are still reasons why it would still be good for lenders to get bad loans off the books even if they would not get a bad debt deduction, but it is clear that a lender is more willing to forgive debt knowing that they will get a tax deduction.

Winter Solstice

In the Northern Hemisphere, the Winter Solstice occurs on December 22, 2007 at 1:08 AM EST; and at 6:08 AM UT (Universal Time). This moment marks the astronomical beginning of winter, and the shortest day and longest night of the year. For all but the most recent tick of the clock of history, darkness and cold pointed to one inescapable truth. Food and fuel might run out. Darkness and death might win against light and life.

This year, the winter solstice corresponds with the end of PSULaw exams. After days of looking down, look up at the night sky. It shines with the brightest stars: Orion, Canis Major, Gemini, Taurus. The brilliant light of these winter stars sailing farther into the western sky with each night are proof that light is on the rise.

Photo by Philip Appleton, SIRTF Science Center, Caltech

Tax Relief for Mortgage Default Income

Yesterday, President Bush signed into law the Mortgage Forgiveness Debt Relief Act of 2007. Under the tax code, a lender who forgives a borrower's debt must provide a form 1099 to the IRS reporting the forgiveness of indebtedness as income to the borower. The new legislation provides taxpayers who experience a home loan foreclosure or renengotiation resulting in forgiveness of indebtendness income with a three-year exclusion up to $2 million. Bush said during the signing ceremony: "The law will increase the incentive for borrowers and lenders to work together to refinance loans -- and it will allow American families to secure lower mortgage payments without facing higher taxes."

When one group of taxpayers gets tax relief, another group of taxpayers picks up the slack. The new law provides an estimated $1.153 billion in tax relief. It's paid for in part by imposition of new tax penalties for taxpayers who fail to file Sub S or partnership tax returns and an increase in corporate estimated tax payments due in 2012. The estimated revenue effects of the tax relief law are here.

If home mortgage borrowers are entitled to forgiveness for the income tax consequences of their default, who is to blame? Forgivness of indebtedness income corresponds with the forgiving lender's bad debt deduction. Why not eliminate the corresponding bad debt deduction for the lenders whose home mortgage loans produce a forgiven deficiency? Tax News reported that when the bill was before the House Ways and Means Committee in September, Rep. Kevin Brady, R-Texas, said that he wished the cost of paying for the relief was more tightly targeted to the lenders and real estate speculators who helped create the subprime lending crisis. Committee Chairman Charles B. Rangel's, D-N.Y. response explains it all for you. "It's so much easier to give the tax break than to pay for it."