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'The Ugly' is a line by line rewrite of 'The Dead'. The characters have all been sex-changed and the story moved to Colorado, but Pigone copies Joyce's language, story line, and plot development. My students think it is very funny - but is it legal?

What an interesting question. I had never read or even heard of Anne Pigone and "The Ugly," so of course I had to read it. I found the web site thedeadandtheugly.com, which discusses the two stories. When you open the full text of one story, by clicking on any paragraph, the corresponding paragraph from the other story will pop up, letting you read the two back to back.

I would not call what Pigone has done plagiarism. She openly admits that her story is "based" on Joyce's work. In an interview on that web site, she states that she considers what she has done to be a work of translation, of translating Joyce's work into modern language and sensibilities. When asked whether her story can stand alone without "The Dead" as its basis, she said:

"I suppose it works just fine as a story as it is - who am I to say. [laughs] But I think the real value lies in the relationship. The pull between them. The shift in context. That said, I know of several people who, though they were familiar with The Dead, read The Ugly and never saw the light - never got the hints.  That is a disappointment, but I can't imagine being more explicitly obvious than I have been."

So she admits that her story relies on "The Dead" for any meaning.

I hope this helps!

So you are saying that self confessed plagarism is not really plagarism? 

Look at this example... 

Joyce:

The patting at once grew louder in encouragement and then ceased altogether. Gabriel leaned his ten trembling fingers on the tablecloth and smiled nervously at the company. Meeting a row of upturned faces he raised his eyes to the chandelier. The piano was playing a waltz tune and he could hear the skirts sweeping against the drawing-room door. People, perhaps, were standing in the snow on the quay outside, gazing up at the lighted windows and listening to the waltz music. The air was pure there. In the distance lay the park where the trees were weighted with snow. The Wellington Monument wore a gleaming cap of snow that flashed westward over the white field of Fifteen Acres.

Pigone:

Placing her confident hands serenely on the back of her chair, she smiled brilliantly, taking in as many of the two hundred expectant faces as possible. The orchestra which had struck up Copeland's Fanfare for the Common Man, concluded with a snare drum roll and the banquet hall servers discretely retired to the back of the room – but no further, choosing to listen, despite a professionally conditioned aversion for wedding speeches, to this famous celebrity, forgoing the opportunity for a quick cig out on the snow covered kitchen landing.

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If this is not plagarism, I don't know what is. 

Plagiarism is defined as using someone else's work as your own. If she admits to copying it, then she is technically not plagiarising....she is just not being a very good author.