1 Chapter 1: Tax Research

2 TAX RESEARCH (1 of 2)  Types of tax research  Tax research process  How facts affect tax consequences  Sources of tax law and authoritative value  Tax services

3 TAX RESEARCH (2 of 2)  Citators  Tax practice guidelines for CPAs  Computerized tax research  Work papers and client communications  Computerized tax research

4 Types of Tax Research (1 of 2)  Close-fact or tax compliance  Facts already occurred  Discovery of tax consequences  Proper disclosure

5 Types of Tax Research (2 of 2)  Open-fact or tax-planning  Before structuring or concluding a transaction  Minimization of taxes  Careful compliance permits legal avoidance of taxation

6 Steps in Tax Research Process (1 of 2)  Determine the facts  Identify the issues (questions)  Locate applicable authorities  Assess and evaluate authorities  Choose which to follow when authorities conflict

7 Steps in Tax Research Process (2 of 2)  Analyze facts in terms of applicable authorities  Communicate conclusions and recommendations to client

8 How Facts Affect Tax Consequences  Ambiguous situations (gray areas)  Facts are clear but the law is not  Law is clear but the facts are not  Advance planning permits facts to develop that produce favorable tax consequences

9 Sources of Tax Law and Authoritative Value (1 of 2)  Legislative authority  The legislative process  Internal Revenue Code  Tax treaties  Administrative authority  Treasury Regulations  Administrative interpretations

10 Sources of Tax Law and Authoritative Value (2 of 2)  Judicial decisions  Overview of courts  Trial courts  Courts of appeals  Supreme Court  Precedential value of decisions  Forum shopping  Tax periodicals

11 Legislative Authority: Legislative Process  House Ways and Means Committee  Voted on by full House  Senate Finance Committee  Voted on by full Senate  Conference Committee  Voted by both full House and Senate  Signed or vetoed by President  Override veto by 2/3 vote by both houses

12 Legislative Authority: Internal Revenue Code (IRC)  Title 26 of the United States Code enacted by Congress  Organization  Title  Subtitle  Chapter Subchapter - Part - Subpart - Section

13 Administrative Authority: Treasury Regulations (1 of 2)  Treasury Dept. delegates authority to IRS to promulgate Treas. Regs.  Types of Treasury Regulations  Proposed: no authoritative weight  Temporary  Provide immediate guidance  Same authority as Final Regs.  Final

14 Administrative Authority: Treasury Regulations (2 of 2)  Interpretative regulations  Interpret related Code section  Less authority than IRC  Legislative regulations  Almost the same authority as IRC  Legislative Reenactment Doctrine

15 Administrative Authority: Admin. Interpretations (1 of 2)  Revenue Rulings  More specific than Regs.  Less authority than Regs.  Revenue Procedures  IRS guidance on procedural matters

16 Administrative Authority: Admin. Interpretations (2 of 2)  Letter Rulings  Reply to specific taxpayer question  Only authority for specific taxpayer  Other interpretations  Technical Advice Memoranda  Information releases  Announcements and notices

17 Judicial Decisions: Overview of Courts

18 Judicial Decisions: Trial Courts (1 of 2)  Tax Court  Taxpayer does not pay deficiency first  No jury trial available  Regular and Memorandum decisions  Small Cases Procedure  Acquiescense policy

19 Judicial Decisions: Trial Courts (2 of 2)  Federal District Courts  May request a jury trial  Must pay deficiency first  U.S. Court of Federal Claims  No jury trial  Must pay deficiency first

20 Judicial Decisions: Courts of Appeals  Losing party at trial level may appeal decision to appellate court  Circuit Courts of Appeals  Appeals from Tax Court & district courts  Based upon geography  Court of Appeals for the Federal Circuit  Appeals from U.S. Court of Federal Claims

21 Judicial Decisions: Supreme Court  Very few tax cases are heard  Hears cases when  Circuit courts are divided or  Issue of great importance  Same authority as IRC

22 Judicial Decisions: Precedential Value of Decisions

23 Tax Services (1 of 2)  Annotated services  Organized by IRC section  United States Tax Reporter by RIA  Standard Federal Tax Reporter by CCH

24 Tax Services (2 of 2)  Topical services organized by topic  Federal Tax Coordinator 2d by RIA  Law of Federal Income Taxation (Mertens) by West Group  Tax Management Portfolios by BNA  CCH Federal Tax Service by CCH

25Citators  History of the case  List of other authorities that have cited the case in question  Figure C1-5 summarizes how to use a citator as part of the research process  CCH Citator  RIA Citator 2nd Series

26 Computerized Research  Web based services integrate several research services and databases  CCH Internet Tax Research Network  RIA CHECKPOINT  Other useful websites  

27 CPA Guidelines  AICPA Statements on Standards for Tax Services  Not legally enforceable  May be cited in a negligence lawsuit as “standard of care” for tax practitioners  Professionally enforceable by AICPA  Violations could result in suspension or loss of license  IRS Circular 230

28 Comments or questions about PowerPoint Slides? Contact Dr. Richard Newmark at University of Northern Colorado’s Kenneth W. Monfort College of Business