1. 1 Chapter 2 Copyright ©2006 Thomson South-Western, Mason, Ohio William A. Raabe, Gerald E. Whittenburg, & Debra L. Sanders Tax Research Methodology

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3. 3 Step 1: Establish the Facts Gather all relevant facts Gather all relevant facts Irrelevant facts may become relevant later Irrelevant facts may become relevant later Constantly be aware that new facts may be needed as the research progresses Constantly be aware that new facts may be needed as the research progresses

4. 4 Significant Facts Client’s tax entity Client’s tax entity Client’s personal (family) situation Client’s personal (family) situation Client’s marginal tax rates Client’s marginal tax rates Client’s legal domicile/citizen Client’s legal domicile/citizen Client’s motivation Client’s motivation Application of special tax status Application of special tax status Whether the transaction is proposed or has been completed Whether the transaction is proposed or has been completed

5. 5 Step 2: Identify the Issues Fact issues Fact issues Concerned with information having an objective reality Concerned with information having an objective reality Dates of transactions Dates of transactions Amounts involved in the transaction Amounts involved in the transaction Law issues Law issues Unclear how law applies to factual issues: Unclear how law applies to factual issues: Possible conflict between Code sections Possible conflict between Code sections No provision found that addresses the client’s specific issue No provision found that addresses the client’s specific issue

6. 6 Simple situations can generate many research issues Simple situations can generate many research issues New issues may arise when solving the original problem New issues may arise when solving the original problem Step 2: Identify the Issues

7. 7 Step 3: Locate Authority Primary Authority Primary Authority Statutory Statutory Administrative Administrative Judicial Judicial Secondary Authority (interpretations of primary authority) Secondary Authority (interpretations of primary authority) Tax services Tax services Tax journals Tax journals Treatises Treatises Newsletters Newsletters

8. 8 Major Tax Services (Secondary Authority)

9. 9 Selected Tax Journals (Secondary Authority)

10. 10 Step 4: Evaluate Authority Different authorities may suggest different treatments (e.g., courts vs. IRS) Different authorities may suggest different treatments (e.g., courts vs. IRS) Different authorities have different precedential values Different authorities have different precedential values

11. 11 Step 5: Develop Conclusions & Recommendations May have no single “best” alternative May have no single “best” alternative Alternatives must be considered Alternatives must be considered Recommendations should include alternatives where appropriate Recommendations should include alternatives where appropriate

12. 12 Step 6: Communicate the Recommendations Memo to client file Memo to client file Include the facts, assumptions, issues, authorities, and recommendations Include the facts, assumptions, issues, authorities, and recommendations Letter to client Letter to client Be certain to use clear language for client understanding Be certain to use clear language for client understanding

13. 13 Overview of Computerized Tax Research Online systems and CD-ROM Systems Online systems and CD-ROM Systems Benefits of using a computerized tax service Benefits of using a computerized tax service Factors in choosing a computerized tax service Factors in choosing a computerized tax service Using a computer in tax research Using a computer in tax research IRS web site research IRS web site research

14. 14 Online Systems Online tax research systems Online tax research systems Accessible with a computer through the internet Accessible with a computer through the internet Documents may be printed or saved to computer Documents may be printed or saved to computer

15. 15 Online Tax Research RIA Checkpoint RIA Checkpoint RIA Checkpoint RIA Checkpoint CCH Tax Research Network CCH Tax Research Network CCH Tax Research Network CCH Tax Research Network BNA BNA BNA LexisNexis LexisNexis LexisNexis Westlaw Westlaw Westlaw

16. 16 CD-ROM Systems CD-ROM tax research systems CD-ROM tax research systems Similar to online tax research systems except databases are stored on CD-ROMs instead of central computers that are accessible through the internet Similar to online tax research systems except databases are stored on CD-ROMs instead of central computers that are accessible through the internet

17. 17 Benefits of Using a Computerized Tax Service Current law (updated daily) Current law (updated daily) Create searches using key terms Create searches using key terms Hyperlinks allow ease of moving among documents Hyperlinks allow ease of moving among documents Computer can quickly process large volume of material Computer can quickly process large volume of material Cost effective Cost effective

18. 18 Using a Computer in Tax Research 1. State the issue as a question 1. State the issue as a question 2. Identify the key words 2. Identify the key words 3. Construct a research query 3. Construct a research query 4. Select databases and execute the search 4. Select databases and execute the search 5. Interpret and refine search 5. Interpret and refine search

19. 19 Steps in the Computer Research Process

20. 20 Selected RIA CheckPoint Search Connectors

21. 21 IRS Web Site Research IRS web site is not a full-service tax research site IRS web site is not a full-service tax research site IRS web IRS web Limited tax research can be conducted Limited tax research can be conducted Contains searchable and downloadable tax information including: Contains searchable and downloadable tax information including: Tax forms, Tax forms, Instructions, Instructions, IRS publications, and IRS publications, and Other IRS information Other IRS information