CHAPTER SIX CULMINATION OF THE TAX RESEARCH PROCESS

EXPECTED LEARNING OUTCOMES l Understand all steps in the research process l Know when additional steps are necessary l Recognize when the research is complete l Appreciate the ethical applicable standards

THE TAX RESEARCH PROCESS

CRITICAL ANALYSIS OF AUTHORITY l Always start with the LAW (First) l Applicable Treasury interpretations (Second) IRS position on issue How close are facts of rulings & procs. Confirm Treasury Regulations reflect current statute. l Applicable case law (Last) What court cases address research question All cases not just the ones supporting your position Appeals v. Court of original jurisdiction Case still authoritative If more than one case, which are strongest Always citate cases l Balancing the two types of authority l What if limited treasury guidelines & cases? l Go over list on Page 312

SOURCES OF ETHICAL GUIDELINES l All research and critical analysis must be performed under umbrella of legal and ethical guidelines: Circular 230 (Treasury) AICPA and ABA (Accounting & Legal Profession) Internal Revenue Code (Congress) – Section 6662 (accuracy related penalties) and related regulations

Circular 230 l Applies for all that practice before the IRS CPAs, attorneys, enrolled agents l New rules: tax advisors Aspire to best practices standards Act fairly and with integrity Monetary penalties can apply.

Professional Membership Guidelines l AICPA Subject to Code of Conduct: Statements on Standards for Tax Services (SSTSs) TSfinal.pdf

Circular 230 l pdf/pcir230.pdf pdf/pcir230.pdf l Guidelines on Engaging the client/fact gathering Researching Communicating and Advising Tax Return Reporting

Engaging the Client l Circular 230 – Best Practices Communicate clearly with the client regarding terms of engagement Determine clients expected purpose for and use of advice Clear understanding of scope and form of advice Risk management of the firm

Fact Gathering l Reasonable Inquiries to check that information is not incorrect, inconsistent or incomplete l Can’t hide behind ignorance of facts or turning a blind eye. l Verify that source documents exist (perhaps view some).

Researching l Due diligence/Realistic Possibility Stndrd - Sustainable on its merits Circular 230 and Reg (b) Reasonable and informed analysis Chance of 33%+ of being sustained. Audit lottery alone is not realistic stnd. List on page 323 of where to get info. l If foregoing test not met, can take a position if it is not frivolous. l Position taken must have substantial authority for understatement of income.

Other Limitations l Recognition of limits of current professional competency Don’t play tax god. Solicit help from other professionals l Different licenses CPA v. Law Lawyer for Litigation/Document review l Beware of Firm Shopping

Engagement Letter l Critical document to spell out expectations of client & professional – contract l If engagement changes, issue addendum to letter. l Helps avoid malpractice claims l Possibly limit scope of work to prevent future malpractice claims.

Other Considerations Continued l Avoid conflicts of interests among clients. If representing conflicting clients get a waiver spelling out duties. l Opinion Letters Are you/firm willing and competent to render opinion Are opinion standards reasonable What conditions/exceptions do you place on the persons relying on the opinions What person will be expressly or implicitly entitled to rely on the opinions

Passage of Time - Duty to Update and other Issues l Engagement letter should spell out whether you have a duty to update work for changes subsequent to original advice l No hard and fast guidelines here. l Avoid too many diverse responsibilities that may imply fiduciary relationship – esp valuations and with estates l Go over chart on page 333

TAX RESEARCH STANDARDS l Fact gathering “Reasonable inquiries” l Researching “Realistic and Advising possibility” l To avoid $ “Substantial penalties authority”

CHAPTER SEVEN COMMUNICATING RESEARCH RESULTS

EXPECTED LEARNING OUTCOMES l Understand the various forms of communication l Appreciate the purpose of an office memo, client letter, and protest letter l Effectively communicate

INTERNAL WRITTEN COMMUNICATION l Office memo: - firm record and road map to research issue Material facts Research question/issue Citation to relevant authority Conclusion and reasoning l Remember firm attrition accents need for well document file.

EXTERNAL WRITTEN COMMUNICATION l Client letter l Protest letter l Letter Ruling request

WRITING A CLIENT LETTER l Statement re: scope of research l Statement re: facts l Discussion of opinion (short form or long form) – go over page l Summary statement

WRITING A PROTEST LETTER – 30 day letter l Used for T/P to present arguments about the reporting position l Information to include (page 369) l Statement of purpose – pursuade taxing authority l Statement re: facts l Statement of issue l Presentation of supporting arguments and authority (consider alternative arguments) l Summary statement – role of client advocate more pronounced here

WRITING A LETTER RULING l See list on Page 371 l Statement of purpose l Statement re: facts l Statement of issue l Presentation of supporting arguments and authority l Summary statement

ORAL COMMUNICATION l Be prepared l Talk without reading notes l Establish eye contact l Consider presentation aids l Other – project voice / Speak at reasonable pace / avoid filler / try to relax.