Practice and Procedure Robert R. Oliva, Ph.D. U.A.L.R.
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Transcript of Practice and Procedure Robert R. Oliva, Ph.D. U.A.L.R.
Agenda
• I. Primary Authorities within Executive Branch
• II. Practice and Procedure
• III. Follow a return
U.S. Treasury
• “TD PROCESS”– PROPOSED
• shall also be issued as a proposed regulation
– TEMPORARY • shall expire within 3 years after the date of
issuance
– FINAL: TD #
• Judicial review
Judicial review
• INTERPRETATIVE– “ACU”
• QUASILEGISLATIVE – Settle
• RE-ENACTMENT DOCTRINE – Settle
• RETROACTIVITY
Retroactivity
• Unless superseded by specific section in the law, – If > 18 months since enactment
• Not earlier than: filing date or substantial notice
– If <18 months since enactment:• To date of enactment
IRS
• REVENUE RULINGS/PROCEDURES
• PLR’s; DETERMINATION LETTERS
• TAM’s
• ACQUIESCENCES AND NONACQUIESCENCES
• IRM
• AOD’s; GCM’s
REVENUE RULINGS/PROCEDURES
• DIFFERENCES
• SIMILARITIES
• RETROACTIVITY: – Yes – Limitations: as announced by IRS
ACQUIESCENCES AND NONACQUIESCENCES
• US TAX COURT– REGULAR OPINIONS
• ISSUES AGAINST IRS
– MEMORANDUM OPINIONS– PERMANENCY
• Other courts
Defenses to substantial understatement
• “Substantial authorities” (S/A): If no tax shelters
• S/A + MLTN: if tax shelter and t/p not a corp.
“substantial authority”
• Objective “analysis” of the law and application of the law to the relevant facts
Nature of the “analysis”
• Weight of authority depends on– Relevance – Persuasiveness – Type of document
• Absence of authority ok if position supported by well-reasoned IRC construction
Relevance
• Material facts at issue are similar to those in the authority (not distinguishable)
• Authority is still applicable to the facts at issue
Type of document
• Rev. Rul. > PLR
• Recent authorities > older authorities– PLR, TAM, GCM, or AOD > 10 years old
accorded very little weight
Exceptions:
• Above authorities will not be considered “s/a” if they are , implicitly or explicitly, – Overruled– Modified
• But TC opinion is not overruled or modified if a COA from another CIR holds otherwise.
Ethical
• Principles: integrity; due care
• Rules: contingent fees
• Section on Taxation: – Do not recommend, prepare, or sign return if
tax position has no realistic possibility of being sustained administratively or judicially (RPOBS).
– Exception: not frivolous and adequately disclosed
Authorities satisfying RPOBS standard:
• All primary and substantial authorities, plus
• Broader than “primary authorities” and “substantial authorities” standard – Articles, treatises (neither primary nor
substantial)– JCT’s general explanation of a revenue act
(not primary)– Prop. Treas. Regs. (Not primary)
RPOBS
• Good faith belief position – Is warranted in existing law – Can be supported by extension, modification,
or reversal of existing law
• Cannot be expressed in terms of percentage odds:– Cir. 230 and IRC 6694 use percentage odds
to define RPOBS.
Circular 230: tax return positions
• May sign return when – There is a realistic possibility of being
sustained, or – It is not frivolous and is adequately disclosed
• Must inform clients as to penalties and how to avoid by disclosure
“Realistic possibility”
• Knowledgeable person conclude that position has a one in three, or greater, likelihood of being sustained
• May use “substantial authorities”
• May not figure chances of being audited
Disciplinary actions
• Violations due to willfulness, reckless, or gross incompetence will subject practitioner to suspension or disbarment from practice before the IRS
Other sections in Circular 230
• Definitions: CPA; practice
• Who may practice: Form 2848; limited practice
• Others: knowledge of client’s omission; notaries; fees; conflicts of interest; negotiation of taxpayer refund check
IRC 6694(a)
• If any part of any understatement ... is due to a position for which there was no realistic possibility of being sustained (RPBS) ....
• ITRP shall pay a penalty of $250
IRC 6694(a): defenses
• ITRP did not know or could not have reasonably known that the position lacked “RPBS”
• Position lacking RPOBS – Was not frivolous – Was adequately disclosed
• RCGF– Reas. Cause for understatement– ITRP acted in good faith
IRC 6694(b): willful or reckless conduct
• ITRP shall pay $1,000 (and referral to director of practice) if
• Any part of any understatement is due to ITRP’s – Willful attempt to understate liability, or – Reckless or intentional disregard of rules or
regulations
III. Follow a return
• Defining a “return”
• Statute of limitations
• Phases: audit; examinations; appeals; assessment; collection
Defining a “return”
• Why should there be a return?– Statute of limitations to issue 90 days letter
• Self-assesment system• IRS’ assessment requires 90 days notice
Elements of a return
• Sufficient data
• Intent
• Reasonable attempt to comply
• Executed under penalty of perjury
Extensions of the statute of limitations
• Form 872: specific date
• Form 872-a: extension until 90 days after – IRS mails 872-t or 90 days letter– IRS receives 872-t
• Limited issue extension:
• Appeals not allowed if < 180 days
Stopping the statute of limitations
• Mailing of 90 days letter
• Submission of offer in compromise
• T/P outside the USA for > 6 months
• Filing amended return w/i 60 days of expiration extends for additional 60 days.
Advantages of appeals
• Review opportunity
• Hazards of litigation
• Exhaust administrative remedies
• Revenue enhancement
Disadvantages of appeals
• “New issues”– Substantial grounds– Material tax liability
• Time and expense
• Relative finality of form 870-AD
Assessment phase
• Preceding condition to liens, levy or court proceedings
• Levy – W/i 6 years of assessment – Administrative or Judicial
• Sale– Redemption