Tax%20Research

1
Chapter 15

• Tax Research

2
Learning Objectives

• Describe the steps in the tax research process
• Explain how the facts affect the tax results
• Identify the sources of tax law and understand
  the authoritative value of each
• Consult the tax services to research an issue

3
Learning Objectives

• Use a citator to assess authorities
• Grasp the basics of computerized tax research
• Understand guidelines to which CPAs in tax
  practice should follow
• Prepare work papers and communications to clients

4
Client-oriented Tax Research

• Closed fact or tax compliance situations
• Least amount of flexibility
• Facts established
• Best solution within predetermined constraints
• Open-fact or tax planning situations
• help client structure transaction to reach
  his/her objective

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Steps In Tax Research Process
DETERMINE THE FACTS
ANALYZE THE FACTS IN TERMS OF THE APPLICABLE
AUTHORITIES
IDENTIFY THE ISSUES
COMMUNICATE YOUR CONCLUSIONS
RECOMMENDATIONS TO INTERESTED PARTY
LOCATE THE APPLICABLE AUTHORITIES
ASSESS EVALUATE THE AUTHORITIES
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How Do Facts Affect Tax Results?

• Facts guide the issues and questions
• In order to answer questions, must consult many
  sources
• Interpretations

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Typical Misconception

• Many taxpayers think tax law is all black and
  white most tax research deals with gray areas,
  previous findings, interpretation

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The Sources Of Tax Law

• Statutory
• Judicial
• Administrative

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Authoritative Value Of Tax Law Sources

• The Internal Revenue Code which constitutes Title
  26 of the Federal Statutes is the foundation of
  all tax law

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Organizational Scheme Of The Internal Revenue Code

• Title 26. All matters concerned with taxation
• Subtitle A. Income taxes
• Chapter 1. Normal taxes and surtaxes
• Subchapter A. Determination of tax liability
• Part 1. Tax on individuals
• Sec. 1. Tax imposed
• Scheme for sections, subsections, etc
• Sec. 165 (h) (2) (A)
  (i) (ii)
• Section
• Paragraph
  clauses
• Subparagraph
• Subsection

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Authoritative Value Of Tax Law Sources

• Treasury Regulations
• Proposed regulations
• Temporary regulations
• Final regulations
• Treasury Regulations
• The Treasury Dept. issues regulations as
  interpretations of the statute

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Authoritative Value Of Tax Law Sources

• Interpretative and statutory regulations
• Interpretative regulations are issued under the
  general authority of Sec. 7805
• Statutory regulations are written in situations
  where congress delegates its rule-making duties
  to the treasury. Usually this happens when
  congress feels it lacks the expertise to deal
  with a highly technical matter

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Authoritative Value Of Tax Law Sources

• Regulations (continued)
• Citations
• Number General Subject Matter
• 1 Income tax
• 20 Estate tax
• 25 Gift tax
• 301 Administrative
• Procedural matters
• 601 Procedural rules

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Example Of Citation

• Regulation Sec. 1.165 - 5
• Fifth
• Income tax code section regulation

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Authoritative Value Of Tax Law Sources

• Authoritative weight
• The presumption is that final regulations have
  the same authoritative weight as statutes
• In addressing the validity of regulations, courts
  often apply the legislative reenactment doctrine

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Administrative Interpretations

• Revenue Rulings
• Revenue Procedures
• Letter Rulings
• Other Interpretations
• Technical advice memoranda
• Information releases
• Announcements and notices

17
Judicial Decisions

• Overview of the court system
• Trial
• Courts
• Appellate Courts
  

US COURT OF FEDERAL CLAIMS
TAX COURT
US DISTRICT COURT FOR THE TAXPAYERS DISTRICT
COURT OF APPEALS FOR FEDERAL CIRCUIT
COURT OF APPEALS FOR TAXPAYERS
GEOGRAPHICAL JURISDICTION
US SUPREME COURT
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Tax Services

• United States Tax Reporter
• Standard Federal Tax Reporter
• Federal Tax Coordinator 2d
• Law of Federal Income Taxation
• Tax Management Portfolios
• CCH Federal Tax Service
• CCH Citator

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Citators Purpose

• Give history of a case
• List other authorities that have cited the case
  in question

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Types Of Citators

• Commerce Clearinghouse Citator
• History of case may be easier to find
• Citator of judicial decisions included at no
  extra charge
• Research Institute of America Citator 2nd
  Series
• conveys more information
• specific issue in case
• referenced cases whether favorable, unfavorable,
  distinguished

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Computers As A Research Tool

• Legal Data Bases
• ACCESS by Commerce Clearinghouse
• LEXIS by Mead Data Central
• WESTLAW by West Publishing

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Statements on Standards for Tax Services (SSTSs)

• Issued by AICPA
• Recommend appropriate standards......And promote
  uniform application by CPAs
• To encourage the development of increased
  understanding of the responsibilities of CPAs by
  the Treasury Department and IRS
• Foster increased public understanding of,
  compliance with, and confidence in our tax system

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Other SSTSs From AICPA

• Use clients estimates, when reasonable
• Inform the client of errors
• Do not inform the IRS of errors without clients
  permission, except when required by law

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Work Papers And Communication With Clients

• Written communication and documentation
  recommended in important, unusual, or complicated
  transactions
• Format in terms of process - steps of tax
  research
• Each firm has its way of doing things