C12-Chp-01-1A-Research-Sources-2012

C12-Chp-01-1A-Research-Sources-2012 - Chapter 1-Part A Tax...

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Chapter 1-Part A. Tax Research Edited January 14, 2012 Howard Godfrey, Ph.D., CPA Professor of Accounting Copyright 2012. Howard Godfrey C12-Chp-01-1A-Research-Sources-2012
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Chapter 1A. Learning Objectives-1 A student should be able to: 1. Understand Reasons for tax law (control economy, social objective, Etc) 2. Describe steps in the tax research process (Know sources of tax law). 3. Explain how the facts influence the tax consequences. 4. Identify sources of tax law & understand the authoritative value of each. 5. Understand the basic citations, such as Ltr.Rul. 201031004 or 130 T.C. 88, etc.
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Chapter 1A. Learning Objectives-2 6. Consult the tax services to research an issue. 7. Use Citator to assess authorities. 8. Grasp the basics of computerized tax research. 9. Understand guidelines that CPAs in tax practice follow. 10. Prepare work papers & communications to clients.
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1. Reasons for Tax Law Why are certain provisions in the tax law?
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Why? Text page 3. What rules are found in sections 167 and 168? What rules are found in Sec. 168(k) and 179? Why do we have the special rules identified in the code sections above?
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Why? Text page 7. What rules are found in section 21? Why do we have the special rules identified in the code section above?
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[Amount $000] 2010 2011 2010 2011 Revenue $900 $900 $900 $700 Expenses 800 800 600 800 Net income $100 $100 $300 ($100) Does sec. 172 help one company? Without Sec. 172 -- 2-year tax for both TP? With Sec. 172 -- 2-year tax for both TP? Does sec. 172 equalize the tax? Company A Company B Why? Text page 10.
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2. Research Steps Describe steps in the tax research process. (Know sources of tax law).
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Client-oriented research is conducted by accounting & law firms for the benefit of their clients. It involves determining the tax consequences of a certain transaction for a given client. It is performed in 1. Closed-fact or tax compliance situations. 2. Open-fact or tax-planning situations.
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Steps in Research Process. Pg. 35+ Circular nature of the tax research process. Get more facts. Restate the research question. Find additional tax law. Six basic steps to the tax research process: A. Determine the facts. B. Identify the issues (questions). C. Locate the applicable authorities. D. Evaluate the authorities and choose those to follow where the authorities conflict. E. Analyze the facts in terms of the applicable authorities. F. Communicate conclusions & recommendations to client.
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Keep in mind A. The objective is not to minimize taxes per se but rather to maximize the after-tax return. B. One does not engage in unilateral transactions; thus, the tax ramifications to all parties to the contract are relevant. C. Taxes are only one of the costs of doing business. D. The time for tax planning is not restricted to when one enters into an investment, contract, and other arrangement, but rather the time extends throughout the life of the activity.
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Uncertainty Tax research often involves an “uncertain area;" that is, one that does not have a clear- cut, unequivocally correct solution.
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