1-1 ©2009 Pearson Education, Inc. Publishing as Prentice Hall

1-2 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 ©2009 Pearson Education, Inc. Publishing as Prentice Hall

1-3 TAX RESEARCH (2 of 2)  Citators  Computers as a research tool  Statements on standards for tax services ©2009 Pearson Education, Inc. Publishing as Prentice Hall

1-4 Overview of Tax Research (1 of 2)  Close-fact or tax compliance  Facts already occurred  Discovery of tax consequences  Proper disclosure ©2009 Pearson Education, Inc. Publishing as Prentice Hall

1-5 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 ©2009 Pearson Education, Inc. Publishing as Prentice Hall

1-6 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 ©2009 Pearson Education, Inc. Publishing as Prentice Hall

1-7 Steps in the Tax Research Process (2 of 2)  Analyze facts in terms of applicable authorities  Communicate conclusions and recommendations to client ©2009 Pearson Education, Inc. Publishing as Prentice Hall

1-8 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 ©2009 Pearson Education, Inc. Publishing as Prentice Hall

1-9 Sources of Tax Law (1 of 2)  Legislative process  Internal Revenue Code  Treasury Regulations  Administrative pronouncements  Judicial decisions  Tax treaties  Tax periodicals ©2009 Pearson Education, Inc. Publishing as Prentice Hall

1-10 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 ©2009 Pearson Education, Inc. Publishing as Prentice Hall

1-11 Internal Revenue Code (IRC)  Title 26 of the United States Code enacted by Congress  Organization  Title  Subtitle  Chapter Subchapter - Part - Subpart - Section ©2009 Pearson Education, Inc. Publishing as Prentice Hall

1-12 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 ©2009 Pearson Education, Inc. Publishing as Prentice Hall

1-13 Treasury Regulations (2 of 3)  Interpretative regulations  Interpret related Code section  Less authority than IRC  Legislative regulations  Almost the same authority as IRC  Legislative reenactment doctrine ©2009 Pearson Education, Inc. Publishing as Prentice Hall

1-14 Treasury Regulations (3 of 3)   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 ©2009 Pearson Education, Inc. Publishing as Prentice Hall

1-15 Administrative Pronouncements (1 of 5)  Revenue Rulings  More specific than Regs.  Less authority than Regs.  Revenue Procedures  IRS guidance on procedural matters ©2009 Pearson Education, Inc. Publishing as Prentice Hall

1-16 Administrative Pronouncements (2 of 5)  Citation of Revenue Rulings and Procedures  Rev. Rul. (or Proc.) 97-4, C.B. 5  4 th Rev. Ruling of 1997  Beginning with 2000, all four digits of the year are used (e.g., Rev. Rul )  In Cumulative Bulletin on p. 5 ©2009 Pearson Education, Inc. Publishing as Prentice Hall

1-17 Administrative Pronouncements (3 of 5)  Letter Rulings  Reply to specific taxpayer question  Only authority for specific taxpayer  Ltr. Rul (August 6, 2001)  2001 – year  30 – week  006 – 6 th letter ruling of the 30 th week ©2009 Pearson Education, Inc. Publishing as Prentice Hall

1-18 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 newspapers ©2009 Pearson Education, Inc. Publishing as Prentice Hall

1-19 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  Just like Revenue Rulings and Procedures ©2009 Pearson Education, Inc. Publishing as Prentice Hall

1-20 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 ©2009 Pearson Education, Inc. Publishing as Prentice Hall

1-21 Overview of Court System ©2009 Pearson Education, Inc. Publishing as Prentice Hall

1-22 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 ©2009 Pearson Education, Inc. Publishing as Prentice Hall

1-23 U.S. Tax Court (2 of 3)  Regular decisions  First time court hears case  Memo decisions  Factual variations of previous cases  Small cases procedure  Cases of <$50,000 eligible  Less formal than regular tax court ©2009 Pearson Education, Inc. Publishing as Prentice Hall

1-24 U.S. Tax Court (3 of 3)  Acquiescence policy  IRS announces whether or not it agrees with Tax Court decisions ©2009 Pearson Education, Inc. Publishing as Prentice Hall

1-25 U.S. District Courts  May request a jury trial  Must pay deficiency first  Unreported decisions  Decisions not officially reported  Published by RIA and CCH ©2009 Pearson Education, Inc. Publishing as Prentice Hall

1-26 U.S. Court of Federal Claims  No jury trial  Must pay deficiency first  Decisions appealable to Circuit Court of Appeals for the Federal Circuit ©2009 Pearson Education, Inc. Publishing as Prentice Hall

1-27 Circuit Courts of Appeals  Losing party at trial level may appeal decision to appellate court  Circuit Courts of Appeals  Appeals from Tax Court & district courts  Based upon geography  Court of Appeals for the Federal Circuit  Appeals from U.S. Court of Federal Claims ©2009 Pearson Education, Inc. Publishing as Prentice Hall

1-28 Supreme Court  Very few tax cases are heard  Hears cases when  Circuit courts are divided or  Issue of great importance  Same authority as IRC ©2009 Pearson Education, Inc. Publishing as Prentice Hall

1-29 Precedential Value of Decisions ©2009 Pearson Education, Inc. Publishing as Prentice Hall

1-30 Tax Services (1 of 2)  Annotated services  Organized by IRC section  United States Tax Reporter by RIA  Standard Federal Tax Reporter by CCH ©2009 Pearson Education, Inc. Publishing as Prentice Hall

1-31 Tax Services (2 of 2)  Topical services organized by topic  Federal Tax Coordinator 2d by RIA  Law of Federal Income Taxation (Mertens) by West Group  Tax Management Portfolios by BNA  CCH Federal Tax Service by CCH ©2009 Pearson Education, Inc. Publishing as Prentice Hall

1-32Citators  History of the case  List of other authorities that have cited the case in question  Figure C1-5 summarizes how to use a citator as part of the research process  CCH Citator  RIA Citator 2nd Series ©2009 Pearson Education, Inc. Publishing as Prentice Hall

1-33 Computers as a Research Tool  Computerized sources  No findings list  Cross referencing facilitated by hyperlinks  No cumulative supplements  New developments integrated into main text  Primary sources accessible from explanatory paragraphs via hyperlinks  Citator symbols explicitly spelled out ©2009 Pearson Education, Inc. Publishing as Prentice Hall

1-34 Statements on Standards for Tax Services (SSTSs)  Issued by AICPA  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  See Appendix E ©2009 Pearson Education, Inc. Publishing as Prentice Hall

Comments or questions about PowerPoint Slides? Contact Dr. Richard Newmark at University of Northern Colorado’s Kenneth W. Monfort College of Business 1-35 ©2009 Pearson Education, Inc. Publishing as Prentice Hall