1

Chapter 1:Tax Research

2

TAX RESEARCHTAX RESEARCH(1 of 2)(1 of 2)

Types of tax researchTax research processHow facts affect tax consequencesSources of tax law and

authoritative value Tax services

3

TAX RESEARCHTAX RESEARCH(2 of 2)(2 of 2)

CitatorsTax practice guidelines for CPAs Computerized tax researchWork papers and client

communicationsComputerized tax research

4

Types of Tax ResearchTypes of Tax Research(1 of 2)(1 of 2)

Close-fact or tax complianceFacts already occurredDiscovery of tax consequencesProper disclosure

5

Types of Tax ResearchTypes of Tax Research(2 of 2)(2 of 2)

Open-fact or tax-planningBefore structuring or concluding

a transactionMinimization of taxesCareful compliance permits legal

avoidance of taxation

6

Steps in Tax Research Steps in Tax Research ProcessProcess (1 of 2) (1 of 2)

Determine the factsIdentify the issues (questions)Locate applicable authoritiesAssess and evaluate authorities

Choose which to follow when authorities conflict

7

Steps in Tax Research Steps in Tax Research ProcessProcess (2 of 2) (2 of 2)

Analyze facts in terms of applicable authorities

Communicate conclusions and recommendations to client

8

How Facts Affect Tax How Facts Affect Tax ConsequencesConsequences

Ambiguous situations (gray areas)Facts are clear but the law is notLaw is clear but the facts are not

Advance planning permits facts to develop that produce favorable tax consequences

9

Sources of Tax Law and Sources of Tax Law and Authoritative Value Authoritative Value (1 of 2)(1 of 2)

Legislative authorityThe legislative processInternal Revenue CodeTax treaties

Administrative authorityTreasury RegulationsAdministrative interpretations

10

Sources of Tax Law and Sources of Tax Law and Authoritative Value Authoritative Value (2 of 2)(2 of 2)

Judicial decisionsOverview of courtsTrial courtsCourts of appealsSupreme CourtPrecedential value of decisionsForum shopping

Tax periodicals

11

Legislative Authority:Legislative Process

House Ways and Means CommitteeVoted on by full HouseSenate Finance CommitteeVoted on by full SenateConference Committee

Voted by both full House and SenateSigned or vetoed by President

Override veto by 2/3 vote by both houses

12

Legislative Authority:Internal Revenue Code (IRC)

Title 26 of the United States Code enacted by Congress

OrganizationTitle

SubtitleChapter

Subchapter - Part

- Subpart - Section

13

Administrative Authority:Treasury Regulations (1 of 2)

Treasury Dept. delegates authority to IRS to promulgate Treas. Regs.

Types of Treasury Regulations Proposed: no authoritative weightTemporary

Provide immediate guidanceSame authority as Final Regs.

Final

14

Administrative Authority:Treasury Regulations (2 of 2)

Interpretative regulationsInterpret related Code sectionLess authority than IRC

Legislative regulationsAlmost the same authority as IRC

Legislative Reenactment Doctrine

15

Administrative Authority:Admin. Interpretations (1 of 2)

Revenue RulingsMore specific than Regs.Less authority than Regs.

Revenue ProceduresIRS guidance on procedural

matters

16

Administrative Authority:Admin. Interpretations (2 of 2)

Letter RulingsReply to specific taxpayer questionOnly authority for specific taxpayer

Other interpretationsTechnical Advice MemorandaInformation releasesAnnouncements and notices

17

Judicial Decisions:Overview of Courts

U.S. TaxCourt

U.S . District Courtfor taxpayer's

district

Court of Appeals fortaxpayer's geographicaljurisdiction (1st - 11th &

D.C. Circuits)

U.S . Court ofFederal Claims

U.S. Court of Appealsfor Federal Circult

Suprem e Court

18

Judicial Decisions:Trial Courts (1 of 2)

Tax CourtTaxpayer does not pay deficiency

firstNo jury trial availableRegular and Memorandum decisionsSmall Cases ProcedureAcquiescense policy

19

Judicial Decisions:Trial Courts (2 of 2)

Federal District CourtsMay request a jury trialMust pay deficiency first

U.S. Court of Federal ClaimsNo jury trialMust pay deficiency first

20

Judicial Decisions:Courts of Appeals

Losing party at trial level may appeal decision to appellate court

Circuit Courts of Appeals Appeals from Tax Court & district courtsBased upon geography

Court of Appeals for the Federal CircuitAppeals from U.S. Court of Federal Claims

21

Judicial Decisions:Supreme Court

Very few tax cases are heardHears cases when

Circuit courts are divided orIssue of great importance

Same authority as IRC

22

Judicial Decisions:Precedential Value of

Decisions

SameCourt

Tpayer’sCircuit

SupremeCourt

GolsenRule

DC X X X

TC X X X X

CFC X X X

CA X X

SC X

23

Tax ServicesTax Services (1 of 2) (1 of 2)

Annotated servicesOrganized by IRC sectionUnited States Tax Reporter by RIAStandard Federal Tax Reporter by

CCH

24

Tax ServicesTax Services (2 of 2) (2 of 2)

Topical services organized by topicFederal Tax Coordinator 2d by RIALaw of Federal Income Taxation

(Mertens) by West GroupTax Management Portfolios by BNACCH Federal Tax Service by CCH

25

CitatorsCitatorsHistory of the caseList of other authorities that

have cited the case in questionFigure C1-5 summarizes how to use a

citator as part of the research processCCH CitatorRIA Citator 2nd Series

26

Computerized ResearchComputerized Research

Web based services integrate several research services and databasesCCH Internet Tax Research NetworkRIA CHECKPOINT

Other useful websiteshttp://www.irs.ustreas.govhttp://www.prenhall.com/phtax

27

CPA GuidelinesCPA GuidelinesAICPA Statements on Standards for Tax

ServicesNot legally enforceable

May be cited in a negligence lawsuit as “standard of care” for tax practitioners

Professionally enforceable by AICPAViolations could result in suspension or loss of

license

IRS Circular 230

28

Comments or questions about PowerPoint Slides?Contact Dr. Richard Newmark atUniversity of Northern Colorado’s

Kenneth W. Monfort College of Businessrichard.newmark@PhDuh.com