Chapter 15 Tax Research 1

Learning Objectives Describe the steps in the tax research process Explain how the facts affect the tax results Identify the sources of tax law and understand the authoritative value of each Consult the tax services to research an issue 2

Learning Objectives Use a citator to assess authorities Grasp the basics of computerized tax research Understand guidelines to which CPAs in tax practice should follow Prepare work papers and communications to clients 3

Client-oriented Tax Research Closed fact or tax compliance situations Least amount of flexibility Facts established Best solution within predetermined constraints • Open-fact or tax planning situations help client structure transaction to reach his/her objective 4

Steps In Tax Research Process DETERMINE THE FACTS ANALYZE THE FACTS IN TERMS OF THE APPLICABLE AUTHORITIES IDENTIFY THE ISSUES COMMUNICATE YOUR CONCLUSIONS & RECOMMENDATIONS TO INTERESTED PARTY LOCATE THE APPLICABLE AUTHORITIES ASSESS & EVALUATE THE AUTHORITIES 5

How Do Facts Affect Tax Results? Facts guide the issues and questions In order to answer questions, must consult many sources Interpretations 6

Typical Misconception Many taxpayers think tax law is all black and white; most tax research deals with gray areas, previous findings, & interpretation 7

The Sources Of Tax Law Statutory Judicial Administrative 8

Authoritative Value Of Tax Law Sources The Internal Revenue Code which constitutes Title 26 of the Federal Statutes is the foundation of all tax law 9

Organizational Scheme Of The Internal Revenue Code Title 26. All matters concerned with taxation Subtitle A. Income taxes Chapter 1. Normal taxes and surtaxes Subchapter A. Determination of tax liability Part 1. Tax on individuals Sec. 1. Tax imposed Scheme for sections, subsections, etc Sec. 165 (h) (2) (A) (i) (ii) Section Paragraph clauses Subparagraph Subsection 10

Authoritative Value Of Tax Law Sources Treasury Regulations Proposed regulations Temporary regulations Final regulations The Treasury Dept. issues regulations as interpretations of the statute 11

Authoritative Value Of Tax Law Sources Interpretative and statutory regulations Interpretative regulations are issued under the general authority of Sec. 7805 Statutory regulations are written in situations where congress delegates its rule-making duties to the treasury. Usually this happens when congress feels it lacks the expertise to deal with a highly technical matter 12

Authoritative Value Of Tax Law Sources Regulations (continued) Citations Number General Subject Matter 1 Income tax 20 Estate tax 25 Gift tax 301 Administrative & Procedural matters 601 Procedural rules 13

Example Of Citation Regulation Sec. 1.165 - 5 Fifth Income tax code section regulation 14

Authoritative Value Of Tax Law Sources Authoritative weight The presumption is that final regulations have the same authoritative weight as statutes In addressing the validity of regulations, courts often apply the legislative reenactment doctrine 15

Administrative Interpretations Revenue Rulings Revenue Procedures Letter Rulings Other Interpretations Technical advice memoranda Information releases Announcements and notices 16

Overview of the court system Judicial Decisions Overview of the court system Trial Courts Appellate Courts US COURT OF FEDERAL CLAIMS TAX COURT US DISTRICT COURT FOR THE TAXPAYER’S DISTRICT COURT OF APPEALS FOR FEDERAL CIRCUIT COURT OF APPEALS FOR TAXPAYER’S GEOGRAPHICAL JURISDICTION US SUPREME COURT 17

Tax Services United States Tax Reporter Standard Federal Tax Reporter Federal Tax Coordinator 2d Law of Federal Income Taxation Tax Management Portfolios CCH Federal Tax Service CCH Citator 18

Citators Purpose Give history of a case List other authorities that have cited the case in question 19

Types Of Citators Commerce Clearinghouse Citator History of case may be easier to find Citator of judicial decisions included at no extra charge • Research Institute of America Citator 2nd Series conveys more information specific issue in case referenced cases whether favorable, unfavorable, distinguished 20

Computers As A Research Tool Legal Data Bases ACCESS by Commerce Clearinghouse LEXIS by Mead Data Central WESTLAW by West Publishing 21

Statements on Standards for Tax Services (SSTSs) Issued by AICPA: Recommend appropriate standards......And promote uniform application by CPAs To encourage the development of increased understanding of the responsibilities of CPAs by the Treasury Department and IRS Foster increased public understanding of, compliance with, and confidence in our tax system 22

Other SSTSs From AICPA Use client’s estimates, when reasonable Inform the client of errors Do not inform the IRS of errors without client’s permission, except when required by law 23

Work Papers And Communication With Clients Written communication and documentation recommended in important, unusual, or complicated transactions Format in terms of process - steps of tax research Each firm has it’s way of doing things 24