Chapter 1 1 Tax Research (Day 3) Dr. Richard Ott ACCTG 833, Fall 2007

Slide D3-2 Sources of Tax Law Statutory authorities Administrative authorities Judicial authorities

Judicial Authorities

Slide D3-4 Judicial Authorities Lower Courts U.S. Tax Court (formerly Board of Tax Appeals) U.S. District Courts U.S. Court of Federal Claims (formerly U.S. Claims Court) Appellate Courts U.S. Courts of Appeal U.S. Supreme Court

Slide D3-5 Citations of Court Cases See examples of proper citations for court cases in the Prentice Hall textbook Check for appeals (possibly reversals) Check changes in underlying IRC sections Check for an IRS acquiescence or nonacquiescence for the case

Judicial Authorities Lower Courts

Slide D3-7 U.S. Tax Court Court hears only federal tax cases Judges are tax specialists Generally, best court for technical tax issues No jury trials allowed Jurisdiction is not limited to residents of any specific geographical region Taxpayer does not have to pay the disputed amount before going to court

Slide D3-8 U.S. Tax Court Precedents the Court follows: Supreme Court decisions Court of Appeals decisions (Golsen Rule) U.S. Tax Court decisions Golsen Rule Follows the decisions of the Court of Appeals having jurisdiction over the taxpayer May reach opposite conclusions for taxpayers with identical facts from different jurisdictions

Slide D3-9 U.S. District Courts Courts hear all types of federal cases Judges are generalists, not tax specialists Taxpayer can request a jury trial Many decisions are poorly structured or poorly conceived from a technical standpoint Jurisdiction is geographically limited Taxpayer must pay the disputed amount and then sue the government for a refund (taxpayer is petitioner, IRS is respondent)

Slide D3-10 U.S. District Courts Precedents the Court follows: Supreme Court Court of Appeals for that District Own District Court

Slide D3-11 U.S. Court of Federal Claims Court hears all cases involving monetary claims against the federal government Judges are generalists (not tax specialists) No jury trials allowed Jurisdiction is not limited to residents of a any specific geographical region Taxpayer must pay the disputed amount and then sue the government for a refund (taxpayer is petitioner, IRS is respondent)

Slide D3-12 U.S. Court of Federal Claims Precedents Court must follow: Supreme Court Court of Appeals for the Federal Circuit U.S. Court of Federal Claims Taxpayers usually pursue cases in this court when applicable District Court and/or Tax Court decisions are adverse

Judicial Authorities Appellate Courts

Slide D3-14 Federal Appellate Courts First level U.S. Court of Appeals Final level U.S. Supreme Court

Slide D3-15 U.S. Court of Appeals 13 Courts of Appeal 11 geographic courts assigned to states (Kansas is 10 th and Missouri is 8 th ) 1 court assigned to Washington, D.C. 1 court assigned to cases coming from the U.S. Court of Federal Claims Precedents the Court follows: Supreme Court U.S. Court of Appeal for that circuit

Slide D3-16 U.S. Supreme Court Final level of appeal and sovereign legal authority for all federal cases Permission to present case must be requested by writ of certiorari (may or may not be granted) Only hear about a dozen tax cases annually Tax cases generally involve an issue at conflict among the U.S. Circuit Courts of Appeal or an issue of major importance

Evaluating Authorities

Slide D3-18 Statutory Authority The Internal Revenue Code is the law as enacted by Congress and signed by the President, therefore, carries the highest weight of authority

Slide D3-19 Treasury Regulations Treasury Regulations carry the second highest weight of authority Supreme Court has held that regulations issued under general authority of IRC §7805(a) have full force and effect of law unless they conflict with the current statute Supreme Court has held that regulations issued under specific legislative authority have the full force and effect of law (unless in conflict with Congressional intent)

Slide D3-20 Other Administrative Authority In general, these provide good indications of the IRS’s position but they are frequently revised and/or superceded and can be overturned by court decisions If there is a supporting court case with a high weight of authority, taxpayer can take a position contrary to an administrative pronouncement PLRs and TAMs carry a lower weight of authority than Revenue Rulings or Procedures

Slide D3-21 Judicial Authority Supreme Court cases carry the highest weight next to the Internal Revenue Code, their decisions can only be changed if: Congress amends the underlying statutes or The Court decides to reverse itself

Slide D3-22 Judicial Authority Court of Appeals cases carry a high weight of authority but less than Supreme Court If court decisions are in conflict across circuits, decisions in taxpayer’s own circuit have higher value as precedent than those of other circuits 2 nd, 9 th and D.C. circuit decisions are important due to numerous innovative, unusual and/or controversial judicial interpretations of law

Slide D3-23 Judicial Authority Tax Court cases also carry a high weight of authority (but less than the Supreme Court), particularly when the issue has not been addressed by a Court of Appeals U.S. Federal Court of Claims cases carry a significant weight of authority U.S. District Court decisions carry a very low weight of authority (especially if the taxpayer is not in that district)

Slide D3-24 Review Question 1 A taxpayer need not pay the disputed tax in advance when the suit is initiated in which lower court? a. U.S. Court of Federal Claims b. U.S. Tax Court c. U.S. District Court

Slide D3-25 Review Question 2 A jury trial is permitted in which court? a. U.S. District Court b. U.S. Tax Court c. U.S. Court of Federal Claims

Slide D3-26 Review Question 3 The Tax Court departs from its general policy of ruling uniformly for all taxpayers in what situation? a. a U.S. District Court in the taxpayer’s jurisdiction has ruled differently on the issue b. the IRS has issued a nonacquiescence to a previous court decision on the issue in the taxpayer’s jurisdiction c. the Court of Appeals for the circuit to which the decision may be appealed has ruled differently on the issue

Slide D3-27 Review Question 4 When the Tax Court follows the opinion of the Circuit Court of Appeals to which the taxpayer may appeal, the court is following what rule? a. Goldberg Rule b. Greenspan Rule c. Golsen Rule

Slide D3-28 Review Question 5 The IRS may issue an acquiescence or nonacquiescence to which of the following court decisions? a. U.S. Tax Court b. U.S. Courts of Appeal c. U.S. Supreme Court d. All of the above e. a. and b. only

Slide D3-29 Review Question 6 In researching a tax position to be taken by a Kansas taxpayer, you find the following sources for and against the position: Do you take the position? For the taxpayer: Against the taxpayer: 9 th Circuit Court of Appeals decision 8 th Circuit Court of Appeals decision Tax Court decision (California taxpayer) Tax Court decision (Missouri taxpayer) Private letter rulingRevenue Ruling