In a closed-fact situation, the facts have occurred, and the tax advisor’s task is to analyze
them to determine the appropriate tax treatment.
In an open-fact situation, by contrast, the facts
have not yet occurred, and the tax advisor’s task is to plan for them or shape them so as to
produce a favorable tax result.
pp. C:1-2 and C:1-3.
According to the AICPA’s Statements on Standards for Tax Services
, the tax practitioner
owes the client the following duties:
(1) to inform the client of (a) the potential adverse
consequences of a tax return position, (b) how the client can avoid a penalty through disclosure,
(c) errors in a previously filed tax return, and (d) corrective measures to be taken; (2) to inquire
of the client (a) when the client must satisfy conditions to take a deduction and (b) when
information provided by him or her appears incorrect, incomplete, or inconsistent on its face;
and (3) not to disclose tax-related errors without the client’s consent.
p. C:1-34 and C:1-35.
When tax advisors speak about "tax law," they refer to the IRC as elaborated by Treasury
Regulations and administrative pronouncements and as interpreted by federal courts.
also includes the meaning conveyed by committee reports.
Committee reports concerning tax legislation explain the purpose behind Congress’
proposing the legislation.
Transcripts of hearings reproduce the testimonies of the persons who
spoke for or against the proposed legislation before the Congressional committees.
reports are sometimes used to interpret the statute.
Committee reports can help resolve ambiguities in statutory language by revealing
Congressional intent. They are indicative of this intent.
pp. C:1-7 and C:1-8.
The Internal Revenue Code of 1986 is updated for every statutory change to Title 26
subsequent to 1986.
Therefore, it includes the post-1986 tax law changes enacted by Congress
and today reflects the current state of the law.
Title 26 deals with all taxation matters, not just income taxation.
It covers estate
tax, gift tax, employment tax, alcohol and tobacco tax, and excise tax matters.
It discusses the tax treatment of property distributions in general
(e.g., amount taxable, amount applied against basis, and amount exceeding basis).
Because Sec. 301 applies to the entire chapter, one should look throughout that
entire chapter (Chapter C:1 – which covers Sec. 1 through Sec. 1399) for any exceptions.
special rule – Sec. 301(e) – is found in Sec. 301.
This special rule explains the tax treatment of
dividends received by a 20% corporate taxpayer.
Section 301(f) indicates some of the important
special rules found in other IRC sections.