Chapter 15 Tax Research. Learning Objectives Describe the steps in the tax research process Explain...
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Transcript of Chapter 15 Tax Research. Learning Objectives Describe the steps in the tax research process Explain...
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Chapter 15
Tax Research
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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
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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
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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
IDENTIFY THE ISSUES
LOCATE THE APPLICABLE AUTHORITIES
ASSESS & EVALUATE THEAUTHORITIES
COMMUNICATE YOURCONCLUSIONS &
RECOMMENDATIONSTO INTERESTED PARTY
ANALYZE THE FACTS IN TERMS OF THE APPLICABLE 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)– CitationsNumber General Subject Matter
1 Income tax 20 Estate tax25 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
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Judicial DecisionsOverview of the court system
Trial
Courts
Appellate
Courts
US COURT OFFEDERAL CLAIMS
US DISTRICT COURTFOR THE TAXPAYER’S
DISTRICT
TAX COURT
COURT OF APPEALSFOR FEDERAL CIRCUIT
US SUPREME COURT
COURT OF APPEALS FOR TAXPAYER’S GEOGRAPHICAL
JURISDICTION
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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
• Data Bases– CCH Internet Tax
Research Network– RIA CHECKPOINT– WESTLAW
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Statements on Standards for Tax Services (SSTSs)
• Provide grounds for the termination and suspension of one’s professional licenses
• SSTSs are professionally enforced • See appendix for SSTSs
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Other SSTSs From AICPA
• Use client’s estimates, when reasonable
• Inform the client of errors
• Do not inform the IRS of errors without client’s permission, except when required by law
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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 it’s way of doing things