2011 Pearson Education Inc Publishing as Prentice Hall

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© 2011 Pearson Education, Inc. Publishing as Prentice Hall 1 -1

© 2011 Pearson Education, Inc. Publishing as Prentice Hall 1 -1

TAX RESEARCH (1 of 2) ® Overview of tax research ® Steps in the

TAX RESEARCH (1 of 2) ® Overview of tax research ® Steps in the tax research process ® Importance of facts to the tax consequences ® Sources of tax law ® Tax services © 2011 Pearson Education, Inc. Publishing as Prentice Hall 1 -2

TAX RESEARCH (2 of 2) ® Professional guidelines for tax services ® Citators ©

TAX RESEARCH (2 of 2) ® Professional guidelines for tax services ® Citators © 2011 Pearson Education, Inc. Publishing as Prentice Hall 1 -3

Overview of Tax Research (1 of 2) ® Close-fact or tax compliance Facts already

Overview of Tax Research (1 of 2) ® Close-fact or tax compliance Facts already occurred Discovery of tax consequences Proper disclosure © 2011 Pearson Education, Inc. Publishing as Prentice Hall 1 -4

Overview of Tax Research (2 of 2) ® Open-fact or tax-planning Before structuring or

Overview of Tax Research (2 of 2) ® Open-fact or tax-planning Before structuring or concluding a transaction Minimization of taxes Careful compliance permits legal avoidance of taxation © 2011 Pearson Education, Inc. Publishing as Prentice Hall 1 -5

Steps in the Tax Research Process (1 of 2) ® Determine the facts ®

Steps in the Tax Research Process (1 of 2) ® Determine the facts ® Identify the issues (questions) ® Locate applicable authorities ® Evaluate authorities Choose which to follow when authorities conflict © 2011 Pearson Education, Inc. Publishing as Prentice Hall 1 -6

Steps in the Tax Research Process (2 of 2) ® Analyze facts in terms

Steps in the Tax Research Process (2 of 2) ® Analyze facts in terms of applicable authorities ® Communicate conclusions and recommendations to client Treas. Dept. Circular 230 covers all written advice communicated to clients © 2011 Pearson Education, Inc. Publishing as Prentice Hall 1 -7

Importance of the Facts to the Tax Consequences ® Ambiguous situations (gray areas) Facts

Importance of the Facts to the Tax Consequences ® Ambiguous situations (gray areas) Facts are clear but the law is not Law is clear but the facts are not ® Advance planning permits facts to develop that produce favorable tax consequences © 2011 Pearson Education, Inc. Publishing as Prentice Hall 1 -8

Sources of Tax Law (1 of 2) ® Legislative process ® Internal Revenue Code

Sources of Tax Law (1 of 2) ® Legislative process ® Internal Revenue Code ® Treasury Regulations ® Administrative pronouncements ® Judicial decisions ® Tax treaties ® Tax periodicals © 2011 Pearson Education, Inc. Publishing as Prentice Hall 1 -9

Legislative Process ® House Ways and Means Committee ® Voted on by full House

Legislative Process ® House Ways and Means Committee ® Voted on by full House ® Senate Finance Committee ® Voted on by full Senate ® Conference Committee Voted ® Signed by both full House and Senate or vetoed by President Override veto by 2/3 vote by both houses © 2011 Pearson Education, Inc. Publishing as Prentice Hall 1 -10

Internal Revenue Code (IRC) ® Title 26 of the United States Code enacted by

Internal Revenue Code (IRC) ® Title 26 of the United States Code enacted by Congress ® Organization Title ¬Subtitle ªChapter ©Subchapter - Part - Subpart - Section © 2011 Pearson Education, Inc. Publishing as Prentice Hall 1 -11

Treasury Regulations (1 of 3) ® Treasury Dept. delegates authority to IRS to promulgate

Treasury Regulations (1 of 3) ® Treasury Dept. delegates authority to IRS to promulgate Treas. Regs. ® Types of Treasury Regulations Proposed: no authoritative weight Temporary ¬Provide immediate guidance ¬Same authority as Final Regs. Final © 2011 Pearson Education, Inc. Publishing as Prentice Hall 1 -12

Treasury Regulations (2 of 3) ® Interpretative Regulations Interpret related Code section Less authority

Treasury Regulations (2 of 3) ® Interpretative Regulations Interpret related Code section Less authority than IRC ® Legislative Almost Regulations the same authority as IRC ® Legislative reenactment doctrine ® Check date of Regs. Law may have changed after written © 2011 Pearson Education, Inc. Publishing as Prentice Hall 1 -13

Treasury Regulations (3 of 3) ® 1. 165 -5 1 – Income tax 165

Treasury Regulations (3 of 3) ® 1. 165 -5 1 – Income tax 165 – IRC citation 5 – 5 th regulation ® Subject matter ¬ 1 – Income tax ¬ 20 – Estate tax ¬ 25 – Gift tax ¬ 301 – Admin/procedural matters ¬ 601 – Procedural rules © 2011 Pearson Education, Inc. Publishing as Prentice Hall 1 -14

Administrative Pronouncements (1 of 5) ® Revenue Rulings More specific than Regs. Less authority

Administrative Pronouncements (1 of 5) ® Revenue Rulings More specific than Regs. Less authority than Regs. ® Revenue IRS Procedures guidance on procedural matters © 2011 Pearson Education, Inc. Publishing as Prentice Hall 1 -15

Administrative Pronouncements (2 of 5) ® Citation of Revenue Rulings and Procedures Rev. Rul.

Administrative Pronouncements (2 of 5) ® Citation of Revenue Rulings and Procedures Rev. Rul. (or Proc. ) 97 -4, 1997 -1 C. B. 5 ¬ 4 th Rev. Ruling of 1997 ªBeginning with 2000, all four digits of the year are used (e. g. , Rev. Rul. 2007 -5) ¬In Cumulative Bulletin 1997 -1 on p. 5 © 2011 Pearson Education, Inc. Publishing as Prentice Hall 1 -16

Administrative Pronouncements (3 of 5) ® Letter Rulings Reply to specific taxpayer question Only

Administrative Pronouncements (3 of 5) ® Letter Rulings Reply to specific taxpayer question Only authority for specific taxpayer Ltr. Rul. 200130006 (August 6, 2001) ¬ 2001 – year ¬ 30 – week ¬ 006 – 6 th letter ruling of the 30 th week © 2011 Pearson Education, Inc. Publishing as Prentice Hall 1 -17

Administrative Pronouncements (4 of 5) ® Other interpretations Technical Advice Memoranda ¬IRS advice to

Administrative Pronouncements (4 of 5) ® Other interpretations Technical Advice Memoranda ¬IRS advice to an IRS agent on technical matters ¬Issued to public in form of letter rulings Information releases ¬Like press releases ¬Written in lay terms ¬Sent to © 2011 newspapers Pearson Education, Inc. Publishing as Prentice Hall 1 -18

Administrative Pronouncements (5 of 5) ® Other interpretations (continued) Announcements and notices ¬More technical

Administrative Pronouncements (5 of 5) ® Other interpretations (continued) Announcements and notices ¬More technical than information releases ¬Address current tax developments ¬IRS bound by to follow ªJust like Revenue Rulings and Procedures © 2011 Pearson Education, Inc. Publishing as Prentice Hall 1 -19

Judicial Decisions ® Overview of court system ® U. S. Tax Court ® U.

Judicial Decisions ® Overview of court system ® U. S. Tax Court ® U. S. District Courts ® U. S. Court of Federal Claims ® U. S. Supreme court ® Precedential value of various decisions © 2011 Pearson Education, Inc. Publishing as Prentice Hall 1 -20

Overview of Court System (1 of 2) Appellate Courts T r i a l

Overview of Court System (1 of 2) Appellate Courts T r i a l C o u r t s © 2011 Pearson Education, Inc. Publishing as Prentice Hall 1 -21

Overview of Court System (2 of 2) Circuit 1 st 2 nd 3 rd

Overview of Court System (2 of 2) Circuit 1 st 2 nd 3 rd 4 th 5 th 6 th 7 th 8 th 9 th 10 th 11 th D. C. Federal States Included in Circuit ME, MA, NH, RI, PR CT, NY, VT DE, NJ, PA, VI MD, NC, SC, VA, WV LA, MS, TX KY, MI, OH, TN IL, IN, WI AR, IA, MN, MO, NE, ND, SD AK, AZ, CA, HI, ID, MT, NV, OR, WA, GU, MP CO, KS, NM, OK, UT, WY AL, FL, GA District of Columbia All Districts © 2011 Pearson Education, Inc. Publishing as Prentice Hall 1 -22

U. S. Tax Court (1 of 3) ® Taxpayer does not pay deficiency before

U. S. Tax Court (1 of 3) ® Taxpayer does not pay deficiency before litigating case ® No jury trial available ® Regular and Memorandum decisions ® Small Cases Procedure ® Acquiescence policy © 2011 Pearson Education, Inc. Publishing as Prentice Hall 1 -23

U. S. Tax Court (2 of 3) ® Regular First decisions time court hears

U. S. Tax Court (2 of 3) ® Regular First decisions time court hears case ® Memo decisions Factual ® Small variations of previous cases procedure Cases of <$50, 000 eligible Less formal than regular tax court © 2011 Pearson Education, Inc. Publishing as Prentice Hall 1 -24

U. S. Tax Court (3 of 3) ® Acquiescence policy IRS announces whether or

U. S. Tax Court (3 of 3) ® Acquiescence policy IRS announces whether or not it agrees with Tax Court decisions © 2011 Pearson Education, Inc. Publishing as Prentice Hall 1 -25

U. S. District Courts ® May request a jury trial ® Must pay deficiency

U. S. District Courts ® May request a jury trial ® Must pay deficiency first ® Unreported decisions Decisions not officially reported ¬Published by RIA and CCH © 2011 Pearson Education, Inc. Publishing as Prentice Hall 1 -26

U. S. Court of Federal Claims ® No jury trial ® Must pay deficiency

U. S. Court of Federal Claims ® No jury trial ® Must pay deficiency first ® Decisions appealable to Circuit Court of Appeals for the Federal Circuit © 2011 Pearson Education, Inc. Publishing as Prentice Hall 1 -27

Circuit Courts of Appeals ® Losing party at trial level may appeal decision to

Circuit Courts of Appeals ® Losing party at trial level may appeal decision to appellate court ® Circuit Courts of Appeals from Tax Court & district courts Based upon geography ® Court of Appeals for the Federal Circuit Appeals from U. S. Court of Federal Claims © 2011 Pearson Education, Inc. Publishing as Prentice Hall 1 -28

Supreme Court ® Very few tax cases are heard ® Hears cases when Circuit

Supreme Court ® Very few tax cases are heard ® Hears cases when Circuit courts are divided or Issue of great importance ® Same authority as IRC © 2011 Pearson Education, Inc. Publishing as Prentice Hall 1 -29

Precedential Value of Decisions © 2011 Pearson Education, Inc. Publishing as Prentice Hall 1

Precedential Value of Decisions © 2011 Pearson Education, Inc. Publishing as Prentice Hall 1 -30

Tax Services (1 of 2) ® Annotated services Organized by IRC section United States

Tax Services (1 of 2) ® Annotated services Organized by IRC section United States Tax Reporter by RIA Standard Federal Tax Reporter by CCH © 2011 Pearson Education, Inc. Publishing as Prentice Hall 1 -31

Tax Services (2 of 2) ® Topical services organized by topic Federal Tax Coordinator

Tax Services (2 of 2) ® Topical services organized by topic Federal Tax Coordinator 2 d by RIA Tax Management Portfolios by BNA CCH Federal Tax Service by CCH © 2011 Pearson Education, Inc. Publishing as Prentice Hall 1 -32

Internet as a Research Tool (1 of 2) Information CHECKPOINT Recent developments Primary &

Internet as a Research Tool (1 of 2) Information CHECKPOINT Recent developments Primary & secondary sources State and local reporters All int’l references Newsstand Estate tax Pension taxation Payroll taxation Federal CCH INTELLICONNECT Tax News, Journals, Newsletters Federal Tax State & Local International State Tax International Tax Financial & Estate Planning Pension & Benefits Pension Payroll © 2011 Pearson Education, Inc. Publishing as Prentice Hall 1 -33

Internet as a Research Tool (2 of 2) ® Searching methods for CHECKPOINT and

Internet as a Research Tool (2 of 2) ® Searching methods for CHECKPOINT and INTELLICONNECT Keyword Index Citation Content © 2011 Pearson Education, Inc. Publishing as Prentice 1 -34

Citators ® History of the case ® List of other authorities that have cited

Citators ® History of the case ® List of other authorities that have cited the case in question ® Refer to Table 5 in book for list of terms describing status change in IRS rulings ® INTELLICONNECT Citator ® CHECKPOINT Citator © 2011 Pearson Education, Inc. Publishing as Prentice Hall 1 -35

Professional Guidelines for Tax Services (1 of 2) ® Treas. Dept. Circular 230 Pertains

Professional Guidelines for Tax Services (1 of 2) ® Treas. Dept. Circular 230 Pertains to all tax practitioners Rules to practice before IRS Guidance on written advice to taxpayers Gives gov’t authority to impose fines for violations of rules © 2011 Pearson Education, Inc. Publishing as Prentice Hall 1 -36

Professional Guidelines for Tax Services (2 of 2) ® AICPA SSTSs Ethical framework for

Professional Guidelines for Tax Services (2 of 2) ® AICPA SSTSs Ethical framework for taxpayer/client relationship High standards of care No duty to verify client information if not suspicious © 2011 Pearson Education, Inc. Publishing as Prentice Hall 1 -37

Comments or questions about Power. Point Slides? Contact Dr. Richard Newmark at University of

Comments or questions about Power. Point Slides? Contact Dr. Richard Newmark at University of Northern Colorado’s Kenneth W. Monfort College of Business richard. [email protected] Duh. com © 2011 Pearson Education, Inc. Publishing as Prentice Hall 1 -38