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WorkingwiththeTaxLaw Chapter ComprehensiveVolume
Copyright 2009 Cengage Learning Comprehensive Volume Comprehensive C2-1
Statutory Sources of Tax Law
(slide 1 of 2)
Internal Revenue Code
Codification of the Federal tax law provisions in a logical sequence Have had three codes:
1939, 1954, 1986
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Statutory Sources of Tax Law
(slide 2 of 2)
Example of Code Citation: 2(a)(1)(A) 2 = section number (a) = subsection (1) = paragraph designation (A) = subparagraph designation
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Legislative Process For Tax Bills
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Administrative Sources of Tax Law
Treasury Department Regulations Revenue Rulings Revenue Procedures, and Various other administrative pronouncements
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Regulations (slide 1 of 4)
Issued by U.S. Treasury Department Provide general interpretations and guidance in applying the Code
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Regulations (slide 2 of 4)
Issued as:
Proposed: preview of final regulations
Do not have force and effect of law
Temporary: issued when guidance needed quickly
Same authoritative value as final regulations
Final:
Force and effect of law
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Regulations (slide 3 of 4)
Example of Regulation citation:
Reg. 1.2
Refers to Regulations under Code 2 Subparts may be added for further identification The numbering patterns of these subparts often have no correlation with the Code subsections
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Regulations (slide 4 of 4)
Example of Proposed Regulation citation: Prop. Reg. 1.2 Example of Temporary Regulation citation: Temp. Reg. 1.1998T
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Revenue Rulings (slide 1 of 2)
Officially issued by National Office of IRS
Provide specific interpretations and guidance in applying the Code Less legal force than Regulations Issued in IRB and accumulated in the Cumulative Bulletins
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Revenue Rulings (slide 2 of 2)
Example of Temporary Revenue Ruling citation Rev.Rul. 200749, I.R.B. No. 31, 237
Explanation: Revenue Ruling Number 49, appearing on page 237 of the 31st weekly issue of the Internal Revenue Bulletin for 2007
Example of Permanent Revenue Ruling citation Rev.Rul. 200749, 20072 C.B. 237
Explanation: Revenue Ruling Number 49, appearing on page 237 of Volume 2 of the Cumulative Bulletin for 2007
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Revenue Procedures (slide 1 of 2)
Concerned with the internal procedures of IRS
Issued similar to Revenue Rulings Issued in IRB and accumulated in the Cumulative Bulletins
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Revenue Procedures (slide 2 of 2)
Example of Revenue Procedure citation
Rev. Proc. 92-29, 1992-1 CB 748
29th Rev. Procedure in 1992 found in volume 1 of Cumulative Bulletin on page 748
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Letter Rulings (slide 1 of 2)
Provide guidance to taxpayer on how a transaction will be taxed before proceeding with it
Issued for a fee upon a taxpayer's request Describe how the IRS will treat a proposed transaction
Apply only to the taxpayer who asks for and obtains the ruling
Post-1984 letter rulings may be substantial authority for purposes of the accuracy-related penalty
Limited to restricted, preannounced areas of taxation
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Letter Rulings (slide 2 of 2)
Example of Letter Ruling citation
Ltr.Rul. 200731021
21st ruling issued in the 31st week of 2007
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Other Administrative Pronouncements (slide 1 of 3)
Treasury Decisions-issued by Treasury Dept. to:
Promulgate new or amend existing Regulations Announce position of the Government on selected court decisions Published in the Internal Revenue Bulletin
Then transferred to the Cumulative Bulletin
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Other Administrative Pronouncements (slide 2 of 3)
Determination Letters
Issued by Area Director at taxpayers request Usually involve completed transactions Not published
Made known only to party making the request
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Other Administrative Pronouncements (slide 3 of 3)
General Counsel Memoranda Technical Advice Memoranda Field Service Advices
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Federal Judicial System
FIGURE 23
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Judicial Sources (slide 1 of 2)
There are four courts of original jurisdiction (trial courts)
U.S. Tax Court: Regular U.S. Tax Court: Small Cases Division Federal District Court U.S. Court of Federal Claims
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Judicial Sources (slide 2 of 2)
U.S. Court of
Issue Number of judges per court Payment of deficiency before trial Jury trial Types of disputes Jurisdiction Appeal route Appeals U.S. Tax Court 19* No No Tax cases only Nationwide U.S. Court of Appeals U.S. District Court Varies Yes Yes Most criminal and civil issues Yes U.S. Court of Appeals Federal Court Federal Claims 16 Yes No Claims against the United States Yes U.S. Court of for the
Location of Taxpayer Nationwide
IRS acquiescence policy Yes
.
*There are also 14 special trial judges and 9 senior judges.
CONCEPT SUMMARY 21
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Appeals Process
Appeals from District Court or Tax Court go to the U.S. Court of Appeals for circuit where taxpayer resides Appeals from Court of Federal Claims is to Court of Appeals for the Federal Circuit Appeal to the Supreme Court is by Writ of Certiorari
Only granted for those cases it desires to hear
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Courts Weights As Precedents
From high to low
Supreme Court Circuit Court of Appeals Tax Court (Regular), U.S. Court of Federal Claims, & U.S. District Courts
Decisions of Small Cases Division of Tax Court have no precedential value and cannot be appealed
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Tax Court (slide 1 of 3)
Issues two types of decisions: Regular and Memorandum
Regular decisions involve novel issues not previously resolved by the court
Regular decisions are published by the U.S. government
CRSO, 128 T.C. 153(2007)
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Tax Court (slide 2 of 3)
Tax Court Memorandum decisions
Memorandum decisions deal with situations necessitating only the application of already established principles of law
Memorandum decisions are made available but are not published the by government
They are currently published on the U.S. Tax Court Web site
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Tax Court (slide 3 of 3)
Memorandum decisions wereand continue to bepublished by several tax services
Consider, for example, three different ways that Jack D. Carr can be cited:
Jack D. Carr, TC Memo 1985-19 Jack D. Carr, 49 TCM 507 (CCH citation) Jack D. Carr, RIA TC Mem. Dec. 85, 019 (RIA citation)
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Trial and Appellate Court Decisions
Examples of citations
Simmons-Eastern v. U.S., 73-1 USTC 9279 (D.Ct. Ga., 1972) (CCH citation) Simmons-Eastern v. U.S., 31 AFTR2d 73-640 (D.Ct. Ga., 1972) (RIA citation) Simmons-Eastern v. U.S., 354 F. Supp. 1003 (D.Ct. Ga., 1972) (West citation)
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Supreme Court Decisions
Examples of citations
U.S. v. The Donruss Co., (USSC, 1969)
69-1 USTC 9167 (CCH citation) 23 AFTR2d 69-418 (RIA citation) 89 S. CT 501 (West citation) 393 U.S. 297 (U.S. Government citation) 21 L.Ed.2d 495 (Lawyer's Co-operative Publishing Co. citation)
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Tax Treaties
The U.S. signs tax treaties with foreign countries to:
Avoid double taxation Render mutual assistance in tax enforcement
Neither a tax law nor a tax treaty takes general precedence
When there is a direct conflict, the most recent item will take precedence A taxpayer must disclose on the tax return any position where a treaty overrides a tax law There is a $1,000 penalty per failure to disclose for individuals ($10,000 for corporations)
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Tax Research
(slide 1 of 2)
A crucial part of the research process is the ability to locate appropriate sources of the tax law
Both electronic and paper-based research tools are available to aid in this search
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Tax Research
(slide 2 of 2)
Computerized tax research tools have replaced paper resources in most tax practices
There are two chief ways to conduct tax research using computer resources:
Online and CD-ROM subscription services and Online free Internet sites
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Tax Services
May be in electronic or paper form
Key research tools for the tax practitioner
The major tax services available include:
Standard Federal Tax Reporter, CCH United States Tax Reporter, RIA Federal Tax Coordinator 2d, RIA Tax Management Portfolios, BNA Federal Income, Gift and Estate Taxation, WG &L CCHs Tax Research Consultant, CCH Mertens Law of Federal Income Taxation, Callaghan and Co.
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Electronic Tax Research
(slide 1 of 3)
CD-ROM Services
CCH, RIA, and WESTLAW offer vast tax libraries Provide search and browsing capabilities for various tax databases and links to tax documents
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Electronic Tax Research
(slide 2 of 3)
On-Line Systems
Lexis/Nexis, CCH, RIA, and WESTLAW provide virtually instantaneous use of tax law sources May be expensive but provides extremely current information
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Electronic Tax Research
(slide 3 of 3)
The Internet provides a wealth of tax information
Information available on web pages of accounting and consulting firms, publishers, tax academics, libraries, and governmental bodies Newsgroups and email capabilities provide opportunities to exchange tax information
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Tax Research Process
FIGURE 25
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Tax Research
Tax research is the method by which an interested party determines the best solution to a tax situation
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Assessing The Validity Of Tax Law Sources (slide 1 of 4)
Regulations
IRS agents must give the Code and the Regulations equal weight when dealing with taxpayers and their representatives Proposed Regulations are not binding on IRS or taxpayer Burden of proof is on taxpayer to show Regulation incorrect
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Assessing The Validity Of Tax Law Sources (slide 2 of 4)
Final Regulations tend to be of three types
Procedural: housekeeping-type instructions Interpretive: rephrase what is in Committee Reports and the Code
Hard to get overturned
Legislative: allow the Treasury Department to determine the details of law
Congress has delegated its legislative powers and these cannot generally be overturned
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Assessing The Validity Of Tax Law Sources (slide 3 of 4)
Revenue Rulings
Carry less weight than Regulations Not substantial authority in court disputes
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Assessing The Validity Of Tax Law Sources (slide 4 of 4)
Judicial sources
Consider the level of the court and the legal residence of the taxpayer Determine whether the decision has been overturned on appeal
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Tax Law Sources (slide 1 of 2)
Primary sources of tax law include:
The Constitution Legislative history materials Statutes Treaties Treasury Regulations IRS pronouncements, and Judicial decisions
In general, the IRS considers only primary sources to constitute substantial authority
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Tax Law Sources (slide 2 of 2)
Secondary Sources include:
Legal periodicals Treatises Legal opinions General Counsel Memoranda, and Written determinations
In general, secondary sources are not authority
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Tax Planning
Consider social, economic, and business goals as well as tax motives Tax avoidance is the legal minimization of tax liabilities and one goal of tax planning Tax evasion is the illegal minimization of tax liabilities
Suggests the use of subterfuge and fraud as a means to tax minimization Can lead to fines and jail
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Taxation on the CPA Examination
Taxation is included in the 3-hour Regulation section and covers:
Federal tax procedures and accounting issues Federal taxation of property transactions Federal taxationindividuals Federal taxationentities
Knowledge is tested using both multiple-choice questions and case studies called simulations
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If you have any comments or suggestions concerning this PowerPoint Presentation for South-Western Federal Taxation, please contact: Dr. Donald R. Trippeer, CPA [e-mail] SUNY Oneonta
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