Chapter 1 Tax Research 1 TAX RESEARCH 1

Chapter 1: Tax Research 1

TAX RESEARCH (1 of 2) ®Types of tax research ®Tax research process ®How facts affect tax consequences ®Sources of tax law and authoritative value ®Tax services 2

TAX RESEARCH (2 of 2) ®Citators ®Tax practice guidelines for CPAs ®Computerized tax research ®Work papers and client communications ®Computerized tax research 3

Types of Tax Research (1 of 2) ®Close-fact or tax compliance Facts already occurred Discovery of tax consequences Proper disclosure 4

Types 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 5

Steps in Tax Research Process (1 of 2) ®Determine the facts ®Identify the issues (questions) ®Locate applicable authorities ®Assess and evaluate authorities Choose which to follow when authorities conflict 6

Steps in Tax Research Process (2 of 2) ®Analyze facts in terms of applicable authorities ®Communicate conclusions and recommendations to client 7

How Facts Affect 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 8

Sources of Tax Law and Authoritative Value (1 of 2) ®Legislative authority The legislative process Internal Revenue Code Tax treaties ®Administrative authority Treasury Regulations Administrative interpretations 9

Sources of Tax Law and Authoritative Value (2 of 2) ®Judicial decisions Overview of courts Trial courts Courts of appeals Supreme Court Precedential value of decisions Forum shopping ®Tax periodicals 10

Legislative Authority: Legislative Process ®House Ways and Means Committee ®Voted on by full House ®Senate Finance Committee ®Voted on by full Senate ®Conference Committee Voted by both full House and Senate ®Signed or vetoed by President Override veto by 2/3 vote by both houses 11

Legislative Authority: Internal Revenue Code (IRC) ®Title 26 of the United States Code enacted by Congress ®Organization Title ¬Subtitle ªChapter ©Subchapter - Part - Subpart - Section 12

Administrative Authority: Treasury Regulations (1 of 2) ®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 13

Administrative Authority: Treasury Regulations (2 of 2) ®Interpretative regulations Interpret related Code section Less authority than IRC ®Legislative regulations Almost the same authority as IRC ®Legislative Reenactment Doctrine 14

Administrative Authority: Admin. Interpretations (1 of 2) ®Revenue Rulings More specific than Regs. Less authority than Regs. ®Revenue Procedures IRS guidance on procedural matters 15

Administrative Authority: Admin. Interpretations (2 of 2) ®Letter Rulings Reply to specific taxpayer question Only authority for specific taxpayer ®Other interpretations Technical Advice Memoranda Information releases Announcements and notices 16

Judicial Decisions: Overview of Courts 17

Judicial Decisions: Trial Courts (1 of 2) ®Tax Court Taxpayer does not pay deficiency first No jury trial available Regular and Memorandum decisions Small Cases Procedure Acquiescense policy 18

Judicial Decisions: Trial Courts (2 of 2) ®Federal District Courts May request a jury trial Must pay deficiency first ®U. S. Court of Federal Claims No jury trial Must pay deficiency first 19

Judicial Decisions: 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 20

Judicial Decisions: Supreme Court ®Very few tax cases are heard ®Hears cases when Circuit courts are divided or Issue of great importance ®Same authority as IRC 21

Judicial Decisions: Precedential Value of Decisions 22

Tax Services (1 of 2) ®Annotated services Organized by IRC section United States Tax Reporter by RIA Standard Federal Tax Reporter by CCH 23

Tax Services (2 of 2) ®Topical services organized by topic Federal Tax Coordinator 2 d by RIA Law of Federal Income Taxation (Mertens) by West Group Tax Management Portfolios by BNA CCH Federal Tax Service by CCH 24

Citators ®History of the case ®List of other authorities that have cited the case in question ®Figure C 1 -5 summarizes how to use a citator as part of the research process ®CCH Citator ®RIA Citator 2 nd Series 25

Computerized Research ®Web based services integrate several research services and databases CCH Internet Tax Research Network RIA CHECKPOINT ®Other useful websites http: //www. irs. ustreas. gov http: //www. prenhall. com/phtax 26

CPA Guidelines ®AICPA Statements on Standards for Tax Services Not legally enforceable ¬May be cited in a negligence lawsuit as “standard of care” for tax practitioners Professionally enforceable by AICPA ¬Violations could result in suspension or loss of license ®IRS Circular 230 27

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