More democratic corruption II

Taxprof on the tax consequence of a town house used by Rahmbo Emanuel for five years.

White House chief of staff Rahm Emanuel's Washington lodging arrangements, a rent-free basement room in a Capitol Hill home owned by Rep. Rosa DeLauro (D-Conn) and her pollster husband, have inspired debate among tax experts and in Republican-leaning parts of the blogosphere.

Tax experts are divided about whether Emanuel would have an IRS liability for the free room. The issue has aroused unusual online interest among tax experts, perhaps because arcane points of tax law rarely intersect with mainstream political events, said Paul Caron, an associate dean at the University of Cincinnati Law School and author of the TaxProf blog.

Caron said Greenberg's polling work for Emanuel and the DCCC muddies the argument that the room is a gift and thus either tax exempt or subject only to limited taxation. "The courts have been very clear. It's very hard to claim something is a gift when you have a business context," said Caron.

Joseph Dodge, a professor at Florida State University College of Law, argued that the room is not subject to tax either as a gift or as income. It's not a gift because it doesn't effectively cost DeLauro and Greenberg anything, Dodge said. Nor would it be taxable as income to Emanuel because of the couple's motive in making the room available, "which would be friendship or generosity," Dodge said.

Something tells me that if this were Tony Snow, we'd be hearing more about it.

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