1. 4 Major Types of Federal Taxes
1. Income taxes
Individual income tax and corporate income tax.
2. Employment taxes
FICA Social Security, FICA Medicare and FUTA.
3. Estate and gift taxes
Taxes on transfers of property
4. Excise and custom taxes
Taxes on transactions (taxes on the purchase of alcohol)
CCH Federal Taxation

2. Tax Avoidance v. Tax Evasion
Tax avoidance—Saving tax dollars through specific actions to avoid the tax liability prior to the time it would have occurred according to the law.
Tax evasion—The taxpayer does not properly report income and expenses even though the taxpayer already has a tax liability and all actions are definitely complete.
CCH Federal Taxation

3. Tax Avoidance v. Tax Evasion
What frequently distinguishes avoidance from evasion is the intent of the taxpayer. Some indications of taxpayer fraud are:
Understatement of income
Claiming of fictitious or improper deductions
Accounting irregularities
Allocation of income
Acts and conduct of the taxpayer
CCH Federal Taxation

4. Tax Legislative Process
1. The Constitution requires that all revenue legislation start in the House Ways and Means Committee.
2. The tax bill is sent to the House of Representatives for approval.
The House debates the bill under a “closed rule” procedure (all amendments must be approved by the House Ways and Means Committee).
3. If approved by the House of Representatives, the bill is sent to the Senate Finance Committee.
The Finance Committee may make amendments to the House bill.
Exhibit 1 page 1-18
CCH Federal Taxation

5. Tax Legislative Process Cont…
4. The bill is sent to the Senate for approval.
Any senator may offer amendments from the floor of the Senate.
Bill may be sent to a Joint Conference Committee if the House and Senate differ. The bill would then be sent back to House and Senate for consideration. At this point, no further amendments can be made.
5. Approved or vetoed by the President
6. Incorporated into the Code if approved by President or if veto is overridden.
Exhibit 1 page 1-18
CCH Federal Taxation

6. Classification of Materials
Primary or “authoritative”
Internal Revenue Code (statutory authority)
Treasury Regulations (administrative authority)
Internal Revenue Service Rulings (administrative authority)
Judicial Authority
Secondary or “reference”
Looseleaf tax reference services
Periodicals
Textbooks
Treatises
Published papers from tax institutes
Symposia
Newsletters
CCH Federal Taxation
Chapter 2, Exhibit 1

7. Judicial Authority The three courts of original jurisdiction are:
U.S. Tax Court
U.S. District Court
U.S. Court of Federal Claims
CCH Federal Taxation
Chapter 2, Exhibit 2a

8. Judicial Authority The appellate courts are:
U.S. Circuit Courts of Appeals
U.S. Court of Appeals for the Federal Circuit
U.S. Supreme Court
CCH Federal Taxation
Chapter 2, Exhibit 2b

9. Five-Step Research Method
1. Gather the facts and identify the tax issues.
2. Locate and study the primary and secondary authorities relevant to the enumerated tax issues.
3. Update and evaluate the weight of the various authorities.
4. Re-examine various facets of the research.
5. Arrive at conclusions; communicate these conclusions to the client.
CCH Federal Taxation
Chapter 2, Exhibit 3

10. Research Sources for Legislative Authority
Authoritative Documents
Research Source
Authorship
Binding
Persuasive
16th Amendment
Constitution
Congress 
Internal Revenue Code
CCH, RIA, and West tax services
CCH Federal Taxation
Chapter 2, Exhibit 4a

11. Research Sources for Legislative Authority
Authoritative
Documents
Research Source
Authorship
Binding
Persuasive
Tax Treaties
(to render mutual assistance between the U.S. and foreign countries in tax enforcement and to avoid double taxation.)
Tax Treaties (CCH)
Worldwide Tax Treaty Library (Tax Analysts)
International Tax Treaties of All Nations (Oceana Publications)
Congress
 (overrides Code if more recent)
CCH Federal Taxation
Chapter 2, Exhibit 4b

12. Research Sources for Legislative Authority
Authoritative Documents
Research Source
Authorship
Binding
Persuasive
Committee Reports (useful for determining Congressional intent when Code and Regs. are unclear)
Cumulative Bulletins [CB] (U.S.
Government.).
Internal Revenue Bulletin [IRB] if written within months
House Ways and Means Committee
Senate Finance Committee
Joint Conference Committee
 (no legal effect; only guidance)
Bluebook (interprets new legislation)
Bluebook
(a government-issued, blue-covered book)
Joint Committee on Taxation
CCH Federal Taxation
Chapter 2, Exhibit 4c

13. Research Sources for Administrative Authority
Authoritative Documents
Research Sources
Authorship
Binding
Persuasive
Final Regulations (Treasury Decisions)
Federal register (U.S. Government.)
Tax services (CCH, RIA and West).
U.S. Treasury Department 
Temporary Regulations (issued without opportunity for public comment because timing is critical)
Federal Register (U.S. Government)
Cumulative Bulletin (U.S. Government)
Tax services (CCH, RIA, and West).
 (binding if < 3 years old)
 (nonbinding if over 3 years old)
Proposed Regulations
Federal Register (U.S. Government)
Tax services (CCH, RIA, and West).
 (nonbinding preview or final Regs.)
CCH Federal Taxation
Chapter 2, Exhibit 5a

14. Research Sources for Administrative Authority
Authoritative Documents
Research Sources
Authorship
Binding
Persuasive
Revenue Rulings (interprets tax laws)
Cumulative Bulletins (U.S. Government)
National office of IRS 
(not approved by the Treasury)
Revenue Procedures (addresses internal procedures of IRS)
Cumulative Bulletins (U.S. Government)
Letter Rulings (explains how IRS will treat a proposed transaction for tax purposes; issued to taxpayers)
IRS Letters Rulings Reports (CCH)
Private Letter Rulings (RIA)
Daily Tax Reports (BNA)
Tax Analysts & Advocates, TAX NOTES
 (only precedent value is for the taxpayer addressed in letter)
CCH Federal Taxation
Chapter 2, Exhibit 5b

15. Research Sources for Administrative Authority
Authoritative Documents
Research Sources
Authorship
Binding
Persuasive
Technical Advice Memoranda [TAMs] (addresses how IRS will treat a completed transaction for tax purposes; issued to District Office, hence “memorandum”)
IRS Position Reporter (CCH)
Tax Notes (Tax Analysts)
Internal Memoranda of the IRS (RIA)
National office of IRS 
(only precedent value is for the taxpayer addressed in memo)
Determination Letters (mainly deal with pension plans and tax-exempt organizations)
Not published, but available by IRS for public inspection
District Director of IRS
(only precedent value is for the taxpayer addressed in letter)
CCH Federal Taxation
Chapter 2, Exhibit 5c

16. Research Sources for Judicial Authority
Binding
Persuasive
U.S. Supreme Court (4 of 9 justices needed to grant certiorari – often granted only when there is conflict among the appellate courts or where the tax issue is extremely important)
USTC (CCH)
AFTR (RIA)
S.Ct. Series (West)
L.Ed. (Lawyer’s Co-op)
U.S. Series (U.S. Government)
 (highest judicial body)
CCH Federal Taxation
Chapter 2, Exhibit 6a

17. Research Sources for Judicial Authority
 (binding to other tax courts in same circuit)
CCH services
RIA services
U.S. Government Printing Office
U.S. Tax Court decisions – regular (deals with novel issues not previously resolved by TC; advance payment of tax not allowed)
 (binding to lower courts in same circuit)
USTC (CCH)
AFTR (RIA)
Federal 3d (West)
U.S. Court of Appeal decisions (hears appeals from any of the three lower courts; the Federal Circuit Appellate Court hears all appeals from the Court of Federal Claims)
Persuasive
Binding
Research Source
Authority
CCH Federal Taxation
Chapter 2, Exhibit 6b

18. Research Sources for Judicial Authority
No precedent authority
Not published
Small Cases Division of Tax Court (informal hearing for disputes of $50,000 or less; appeals process not available)
TCM (CCH)
T.C. Memo (RIA)
U.S. Tax Court decisions—
Memorandum (deals with factual issues necessitating application of established principles of tax law; advance payment of tax not allowed)
Persuasive
Binding
Research Source
Authority
 (binding to other tax courts in same circuit)
CCH Federal Taxation
Chapter 2, Exhibit 6c

19. Research Sources for Judicial Authority
Binding
Persuasive
U.S. District Court (jury trial available for factual issues but not for legal issues)
USTC (CCH)
AFTR (RIA)
F. Supp. Series (West)
 (binding to courts in same district)
U.S. Court of Federal
Claims (hears any claims
against U.S. that is based on
the Constitution,
an Act of Congress, or a
Regulation of any
executive department)
Federal Claims Reporter (West)
 (binding to same court)
CCH Federal Taxation
Chapter 2, Exhibit 6d

20. Commercial Publishers of Comprehensive Services
Description
Standard Federal Tax Reporter (“Standard”), CCH
Comprehensive, self-contained reference service. 25 coordinated and cross-referenced loose-leaf volumes that provide comprehensive coverage of the income tax law. Compiles legislative, administrative, and judicial aspects of the income tax law, arranged in Code section order. Also contains weekly supplements concerning current legislative, administrative, or judicial changes in tax law.
United States Tax Reporter, RIA
Comprehensive, self-contained reference service. 18 coordinated loose-leaf volumes organized by Code sections and updated weekly. Similar to CCH. RIA is known for its willingness to take a stand on controversial issues not covered by legislation or tax law.
Federal Tax Service, CCH
Contains several volumes of compilation material organized by topic. The Code, Regulations, and Committee Reports are contained in separate volumes. The chapters are prepared by over 250 practitioners.
CCH Federal Taxation
Chapter 2, Exhibit 7a

21. Commercial Publishers of Comprehensive Services
Description
Federal Tax Coordinator, RIA
26-volume service organized by topic, rather than Code sections. Popular features include editorial explanations, illustrations, planning ideas, and warnings of potential tax traps.
Merten’s, Law of Federal Income Taxation, Clark, Boardman Callaghan & Co.
Useful complement to traditional reference services. In-depth discussions of general concepts of tax law. Often quoted in judicial decisions. Sometimes difficult reading due to its legalistic style. Also, updating is less frequent than most other services and not as accessible.
Tax Management Portfolios, BNA
Useful complement to traditional reference services. Each booklet ranges in length from 50 to 200 pages and deals exclusively with a special tax topic covering Code, Regulations, reference to primary authorities, and extensive editorial discussion, including numerous tax planning ideas. Problems of inconvenience may develop when there is no one portfolio squarely on point and the research effort requires reference to many portfolios. Updates are convenient though not extensive.
CCH Federal Taxation
Chapter 2, Exhibit 7b

22. Commercial Publishers of Comprehensive Services
Description
CCH ONLINE
An electronic research service. Incorporates practitioner-oriented access methods to successfully located the desired tax information and to retrieve documents of special interest. Available in many different “libraries” addressing tax and nontax topics.
LEXIS/NEXIS, Reed Elsevier, Inc.
An electronic research service. LEXIS accesses federal statutes, regulations, IRS rulings, and judicial decisions. NEXIS contains the full text of over 500 publications.
WESTLAW, West Publishing Co.
An electronic research service. Provides much of the same data as Lexis. Available online or CD-ROM.
CCH Federal Taxation
Chapter 2, Exhibit 7c

23. Commercial Publishers of Judicial Decisions
Service
Description
CCH Citator, CCH
Two-volume, loose-leaf reference service. Contains alphabetical listing of Tax Court (formerly Board of Tax Appeals, “BTA”) and federal court decisions since Indicates a paragraph reference where each case is digested in the Compilation Volumes of the Standard Federal Tax Reporter. Each listing outlines the judicial history of a selected case beginning with the highest court to have ruled on that issue.
CCH Federal Taxation
Chapter 2, Exhibit 8a

24. Commercial Publishers of Judicial Decisions
Service
Description
Federal Tax Citator, RIA
Seven-volume citator service organized in a manner consistent with CCH Citator. Provides an alphabetical list of court cases followed by a descriptive legislative history of each case.
U.S. Tax Cases (USTC), CCH
Series of volumes that cover Supreme Court, Courts of Appeals, District Courts, and Court of Federal Claims cases since 1913.
CCH Federal Taxation
Chapter 2, Exhibit 8b

25. Commercial Publishers of Judicial Decisions
Service
Description
American Federal Tax Reports (AFTR), RIA
Comparable to USTC above.
Tax Court Memorandum Decisions (TCM), CCH
Publishes memorandum decisions of the Tax Court.
TC Memorandum Decisions (TC Memo), RIA
Similar to TCM above.
CCH Federal Taxation
Chapter 2, Exhibit 8c

26. Penalties Delinquency penalties Accuracy-related and fraud penalties
Negligence penalty
Substantial understatement of tax liability
Substantial valuation misstatement penalty
Substantial overstatement of pension liabilities
Estate of gift tax valuation understatements
Penalty for aiding understatement of tax liability
Civil fraud penalty
Criminal fraud penalty
Estimated taxes and underpayment penalties
Failure to make deposits of taxes
Tax preparer penalties
CCH Federal Taxation
Chapter 2, Exhibit 16