Chapter 15
Tax Research
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
? Use the tax services to research an
issue
Learning Objectives
? Use the citator to assess authorities
? Understand the basics of computerized
tax research
? Understand the guidelines to which
CPAs in tax practice should adhere
? Prepare work papers and
communications to clients
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
Steps In Tax Research
Process
DETERMINE THE FACTS
IDENTIFY THE ISSUES
LOCATE THE
APPLICABLE
AUTHORITIES
ASSESS & EVALUATE THE
AUTHORITIES
COMMUNICATE YOUR
CONCLUSIONS &
RECOMMENDATIONS
TO INTERESTED PARTY
ANALYZE THE FACTS IN TERMS OF
THE APPLICABLE AUTHORITIES
How Do Facts Affect Tax
Results?
? Facts guide the
issues and
questions
? In order to answer
questions,must
consult many
sources
? Interpretations
Typical Misconception
? Many taxpayers
think tax law is
all black and
white; most tax
research deals
with gray areas,
previous
findings,&
interpretation
The Sources Of Tax Law
? Statutory
? Judicial
? Administrative
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
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
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
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
Authoritative Value Of Tax
Law Sources
? Regulations (continued)
– Citations
Number General Subject Matter
1 Income tax
20 Estate tax
25 Gift tax
301 Administrative &
Procedural matters
601 Procedural rules
Example Of Citation
? Regulation Sec,1.165 - 5
Fifth
? Income tax code section regulation
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
Administrative
Interpretations
? Revenue Rulings
? Revenue Procedures
? Letter Rulings
? Other Interpretations
– Technical advice memoranda
– Information releases
– Announcements and notices
Judicial Decisions
Overview of the court system
Trial
Courts
Appellate
Courts
US COURT OF
FEDERAL CLAIMS US DISTRICT COURT
FOR THE TAXPAYER’S
DISTRICT
TAX
COURT
COURT OF APPEALS
FOR FEDERAL CIRCUIT
US SUPREME COURT
COURT OF APPEALS FOR
TAXPAYER’S GEOGRAPHICAL
JURISDICTION
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
Citators Purpose
? Give history of a
case
? List other
authorities that
have cited the case
in question
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
u specific issue in case
u referenced cases whether favorable,
unfavorable,distinguished
Computers As A Research
Tool
? Legal Data Bases
– ACCESS by
Commerce
Clearinghouse
– LEXIS by Mead
Data Central
– WESTLAW by
West Publishing
Statements on Standards for
Tax Services (SSTSs)
? Issued by AICPA,
– Recommend appropriate standards......And
promote uniform application by CPAs
– To encourage the development of increased
understanding of the responsibilities of CPAs
by the Treasury Department and IRS
– Foster increased public understanding of,
compliance with,and confidence in our tax
system
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
Work Papers And 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
Tax Research
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
? Use the tax services to research an
issue
Learning Objectives
? Use the citator to assess authorities
? Understand the basics of computerized
tax research
? Understand the guidelines to which
CPAs in tax practice should adhere
? Prepare work papers and
communications to clients
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
Steps In Tax Research
Process
DETERMINE THE FACTS
IDENTIFY THE ISSUES
LOCATE THE
APPLICABLE
AUTHORITIES
ASSESS & EVALUATE THE
AUTHORITIES
COMMUNICATE YOUR
CONCLUSIONS &
RECOMMENDATIONS
TO INTERESTED PARTY
ANALYZE THE FACTS IN TERMS OF
THE APPLICABLE AUTHORITIES
How Do Facts Affect Tax
Results?
? Facts guide the
issues and
questions
? In order to answer
questions,must
consult many
sources
? Interpretations
Typical Misconception
? Many taxpayers
think tax law is
all black and
white; most tax
research deals
with gray areas,
previous
findings,&
interpretation
The Sources Of Tax Law
? Statutory
? Judicial
? Administrative
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
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
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
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
Authoritative Value Of Tax
Law Sources
? Regulations (continued)
– Citations
Number General Subject Matter
1 Income tax
20 Estate tax
25 Gift tax
301 Administrative &
Procedural matters
601 Procedural rules
Example Of Citation
? Regulation Sec,1.165 - 5
Fifth
? Income tax code section regulation
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
Administrative
Interpretations
? Revenue Rulings
? Revenue Procedures
? Letter Rulings
? Other Interpretations
– Technical advice memoranda
– Information releases
– Announcements and notices
Judicial Decisions
Overview of the court system
Trial
Courts
Appellate
Courts
US COURT OF
FEDERAL CLAIMS US DISTRICT COURT
FOR THE TAXPAYER’S
DISTRICT
TAX
COURT
COURT OF APPEALS
FOR FEDERAL CIRCUIT
US SUPREME COURT
COURT OF APPEALS FOR
TAXPAYER’S GEOGRAPHICAL
JURISDICTION
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
Citators Purpose
? Give history of a
case
? List other
authorities that
have cited the case
in question
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
u specific issue in case
u referenced cases whether favorable,
unfavorable,distinguished
Computers As A Research
Tool
? Legal Data Bases
– ACCESS by
Commerce
Clearinghouse
– LEXIS by Mead
Data Central
– WESTLAW by
West Publishing
Statements on Standards for
Tax Services (SSTSs)
? Issued by AICPA,
– Recommend appropriate standards......And
promote uniform application by CPAs
– To encourage the development of increased
understanding of the responsibilities of CPAs
by the Treasury Department and IRS
– Foster increased public understanding of,
compliance with,and confidence in our tax
system
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
Work Papers And 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
