IG_C26 - CHAPTER 26 TAX PRACTICE AND ETHICS LECTURE NOTES...

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CHAPTER 26 TAX PRACTICE AND ETHICS LECTURE NOTES TAX ADMINISTRATION 1. Treasury has delegated the administration and enforcement of the tax law to the IRS. a. The major distinguishing feature between the two is that the IRS is a subsidiary of the Treasury Department. Thus, the Secretary of the Treasury ranks higher than the Commissioner of the IRS. Neither is the Treasurer of the U.S. b. IRS performs the following functions It enforces the revenue laws of the Federal government. It educates taxpayers as to the operation of the tax laws. It collects current and delinquent taxes as authorized by these laws. IRS Procedure—Letter Rulings 2. Rulings are issued by the national Office to provide guidance as the position of the IRS concerning a particular tax issue. 3. Difference between letter rulings and Revenue Rulings is one of both form and effect. a. Letter ruling applies only to the taxpayer who requested the ruling. Revenue Rulings apply to the entire taxpaying public. b. Although released by the IRS, letter rulings are not published by the U.S. Government Printing Office. They are, however, reprinted by the various tax services. Revenue Rulings are published by the U.S. Government in temporary form (i.e., IRB) and later compiled in permanent form (i.e., CB). 26-1
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26-2 2009 Comprehensive Volume/Instructor’s Guide with Lecture Notes c. If letter rulings are deemed to be of significant applicability, they may later be published as Revenue Rulings. d. Letter rulings are of particular significance when a large amount of tax liability could be involved. Thus, the procedure is frequently utilized in a corporate setting when considering reorganizations, stock redemptions, liquidations, etc. e. On occasion, the letter ruling procedure can be utilized to find out the flaws of a proposed transaction. For example, if the ruling is negative and the rationale behind the holding is given, it may enable the taxpayer to “clean up its act” by varying the proposed transaction in such a way as to pass muster. f. Letter ruling is an insurance policy that can be relied upon only if the transaction is carried out as proposed. Thus, a variation between what is actually done and what was proposed can neutralize the ruling. g. IRS charges fees of taxpayers who request letter rulings and determination letters. The amount of the fee can be significant; it depends upon the type of request and the taxpayer’s income level. IRS Procedure—Other Issuances 4. Unpublished IRS letters rulings include the following. a. Determination letters are most commonly used with regard to employment status, qualification of pension and profit-sharing plans, and tax-exempt status. b.
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IG_C26 - CHAPTER 26 TAX PRACTICE AND ETHICS LECTURE NOTES...

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