Chapter 2 Exhibits 1. Classification of Materials 2. Judicial Authority 3. Five-Step Research Method 4. Research Sources for Legislative Authority 5. Research Sources for Administrative Authority 6. Research Sources for Judicial Authority 7. Commercial Publishers of Comprehensive Services 8. Commercial Publishers of Judicial Decisions 9. Commercial Publishers of Current DevelopmentsChapter 2, Exhibit Contents A CCH Federal Taxation Basic Principles 2 of 32
Chapter 2 Exhibits 10. Organization of the IRS 11. IRS Communications 12. Examination of Returns 13. Appeals Administrative Process 14. Taxpayer Bill of Rights 15. Choice of Tax Forum 16. PenaltiesChapter 2, Exhibit Contents B CCH Federal Taxation Basic Principles 3 of 32
Classification of Materials Primary or “authoritative” Internal Revenue Code (statutory authority) Treasury Regulations (administrative authority) Internal Revenue Service Rulings (administrative authority) Judicial Authority Secondary or “reference” Looseleaf tax reference services Periodicals Textbooks Treatises Published papers from tax institutes Symposia NewslettersChapter 2, Exhibit 1 CCH Federal Taxation Basic Principles 4 of 32
SOURCES OF INFORMATION INTERNAL REVENUE CODE TREASURY REGULATIONS REVENUE RULINGS AND REVENUE PROCEDURES PRIVATE LETTER RULINGS JUDICIAL SOURCES OF THE TAX LAW CCH Federal Taxation Basic
INTERNAL REVENUE CODE The code is compiled and published in the United States Code (U.S.C.) under Title 26.
TREASURY REGULATIONS Section 7805 of the IRC grants authority for the commissioner of the IRS to prescribe rules and regulations for the enforcement of the IRC. The regulations interpret the Code. They are arranged in the same sequence. Regulations are, however, prefixed by a number which designates the type of tax or administrative, procedural or definitional matter to which they relate.
REVENUE RULINGS AND REVENUE PROCEDURES Revenue Rulings provide interpretation of the tax law. They do not, however, have the same legal weight as do the regulations and usually deal with more restricted problems. Revenue Procedures deal with internal management practices and procedures of the IRS.
PRIVATE LETTER RULINGS Letter rulings are issued upon a taxpayers request and describe how the IRS will treat a proposed transaction for tax purposes. The IRS limits the issuance of individual letter rulings to restricted, preannounced areas of taxation. The IRS will not rule in areas when they involve fact oriented situations.
JUDICIAL SOURCES OF THE TAX LAW Cases involving Federal tax litigation may be brought in either the U.S. Tax Court, Federal District Court or Claims Court. However, in order to petition the Federal District Court or the Claims Court, the taxpayer must first pay the tax and file a claim for refund. Such refund would have to be denied by the IRS and a statutory notice of claim disallowance issued.
Judicial Authority The three courts of original jurisdiction are: U.S. Tax Court U.S. District Court U.S. Court of Federal ClaimsChapter 2, Exhibit 2a CCH Federal Taxation Basic Principles 11 of 32
Judicial Authority The appellate courts are: U.S. Circuit Courts of Appeals U.S. Court of Appeals for the Federal Circuit U.S. Supreme CourtChapter 2, Exhibit 2b CCH Federal Taxation Basic Principles 12 of 32
Five-Step Research Method 1. Gather the facts and identify the tax issues. 2. Locate and study the primary and secondary authorities relevant to the enumerated tax issues. 3. Update and evaluate the weight of the various authorities. 4. Re-examine various facets of the research. 5. Arrive at conclusions; communicate these conclusions to the client.Chapter 2, Exhibit 3 CCH Federal Taxation Basic Principles 13 of 32
Research Sources for Legislative Authority Authoritative Research Authorship Binding Persuasive Documents Source 16th Amendment Constitution Congress √ Internal Revenue CCH, RIA, Congress √ Code and West tax servicesChapter 2, Exhibit 4a CCH Federal Taxation Basic Principles 14 of 32
Research Sources for Legislative Authority Authoritative Research Source Authorship Binding Persuasive Documents Tax Treaties • Tax Treaties (CCH) Congress √ (to render mutual • Worldwide Tax (overrides assistance between the Code if U.S. and foreign Treaty Library (Tax more countries in tax Analysts) recent) enforcement and to avoid double • International Tax taxation.) Treaties of All Nations (Oceana Publications)Chapter 2, Exhibit 4b CCH Federal Taxation Basic Principles 15 of 32
Research Sources for Legislative AuthorityAuthoritative Research Source Authorship Binding PersuasiveDocumentsCommittee Reports Cumulative House Ways √(useful for determining Bulletins [CB] (U.S. and Means (no legal effect;Congressional intent when only guidance)Code and Regs. are unclear) Government.). Committee Internal Revenue Senate Bulletin [IRB] if Finance written within 6 Committee months Joint Conference CommitteeBluebook Bluebook Joint Committee √(interprets new legislation) (a government-issued, blue- on Taxation (no legal effect; covered book) only guidance)Chapter 2, Exhibit 4c CCH Federal Taxation Basic Principles 16 of 32
Research Sources for Administrative AuthorityAuthoritative Documents Research Sources Authorship Binding PersuasiveFinal Regulations Federal register U.S. Treasury √(Treasury Decisions) (U.S. Government.) Department Tax services (CCH, RIA and West).Temporary Regulations Federal Register U.S. Treasury √ √ (U.S. Government) Department (binding (nonbinding if(issued without Cumulative Bulletin if < 3 over 3 yearsopportunity for public (U.S. Government) years old) old)comment because Tax servicestiming is critical) (CCH, RIA, and West).Proposed Regulations Federal Register U.S. Treasury √ (U.S. Government) Department (nonbinding Cumulative Bulletin preview of (U.S. Government) final Regs.) Tax services (CCH, RIA, and West).Chapter 2, Exhibit 5a CCH Federal Taxation Basic Principles 17 of 32
Research Sources for Administrative Authority Authoritative Research Sources Authorship Binding Persuasive DocumentsRevenue Rulings Cumulative Bulletins National office √(interprets tax laws) (U.S. Government) of IRS (not approved by the Treasury)Revenue Procedures Cumulative Bulletins National office √(addresses internal (U.S. Government) of IRS (not approvedprocedures of IRS) by the Treasury)Letter Rulings (explains IRS Letters Rulings Reports National office √how IRS will treat a (CCH) of IRS (only precedentproposed transaction for Private Letter Rulings value is for thetax purposes; issued to taxpayertaxpayers) (RIA) addressed in Daily Tax Reports (BNA) letter) Tax Analysts & Advocates, TAX NOTESChapter 2, Exhibit 5b CCH Federal Taxation Basic Principles 18 of 32
Research Sources for Administrative AuthorityAuthoritative Research Sources Authorship Binding PersuasiveDocumentsTechnical Advice IRS Position Reporter National office √Memoranda [TAMs] (CCH) of IRS (only precedent(addresses how IRS will Tax Notes (Tax Analysts) value is for thetreat a completed taxpayertransaction for tax Internal Memoranda of the addressed inpurposes; issued to District IRS (RIA) memo)Office, hence“memorandum”)Determination Letters Not published, but available by District Director √(mainly deal with IRS for public inspection of IRS (only precedentpension plans and tax- value is for theexempt organizations) taxpayer addressed in letter)Chapter 2, Exhibit 5c CCH Federal Taxation Basic Principles 19 of 32
Research Sources for Judicial Authority Authority Research Source Binding Persuasive U.S. Supreme Court USTC (CCH) √ (4 of 9 justices needed to AFTR (RIA) (highest grant certiorari – often judicial S.Ct. Series (West) granted only when there is conflict among the appellate L.Ed. body) courts or where the tax issue (Lawyer’s Co-op) is extremely important) U.S. Series (U.S. Government)Chapter 2, Exhibit 6a CCH Federal Taxation Basic Principles 20 of 32
Research Sources for Judicial Authority Authority Research Source Binding Persuasive U.S. Court of Appeal USTC (CCH) √ decisions AFTR (RIA) (binding to (hears appeals from any of the lower courts Federal 3d (West) in same three lower courts; the Federal Circuit Appellate Court hears all circuit) appeals from the Court of Federal Claims) U.S. Tax Court decisions – CCH services √ regular RIA services (binding to other tax (deals with novel issues not U.S. Government courts in same previously resolved by TC; Printing Office circuit) advance payment of tax not allowed)Chapter 2, Exhibit 6b CCH Federal Taxation Basic Principles 21 of 32
Research Sources for Judicial Authority Authority Research Source Binding Persuasive U.S. Tax Court decisions TCM (CCH) √ — T.C. Memo (RIA) (binding to other tax Memorandum courts in same (deals with factual issues circuit) necessitating application of established principles of tax law; advance payment of tax not allowed) Small Cases Division of Tax Not published No precedent Court authority (informal hearing for disputes of $50,000 or less; appeals process not available)Chapter 2, Exhibit 6c CCH Federal Taxation Basic Principles 22 of 32
Research Sources for Judicial Authority Authority Research Source Binding Persuasive U.S. District Court USTC (CCH) √ (jury trial available for factual AFTR (RIA) (binding to issues but not for legal issues) courts in same F. Supp. Series district) (West) U.S. Court of Federal USTC (CCH) √ Claims (hears any claims AFTR (RIA) (binding to against U.S. that is based on same court) the Constitution, Federal Claims an Act of Congress, or a Reporter (West) Regulation of any executive department)Chapter 2, Exhibit 6d CCH Federal Taxation Basic Principles 23 of 32
Commercial Publishers of Comprehensive Services Service DescriptionStandard Federal Comprehensive, self-contained reference service. 25 coordinated and cross-Tax Reporter referenced loose-leaf volumes that provide comprehensive coverage of the(“Standard”), CCH income tax law. Compiles legislative, administrative, and judicial aspects of the income tax law, arranged in Code section order. Also contains weekly supplements concerning current legislative, administrative, or judicial changes in tax law.United States Tax Comprehensive, self-contained reference service. 18 coordinated loose-leafReporter, volumes organized by Code sections and updated weekly. Similar to CCH.RIA RIA is known for its willingness to take a stand on controversial issues not covered by legislation or tax law.Federal Tax Contains several volumes of compilation material organized by topic. TheService, Code, Regulations, and Committee Reports are contained in separate volumes.CCH The chapters are prepared by over 250 practitioners.Chapter 2, Exhibit 7a CCH Federal Taxation Basic Principles 24 of 32
Commercial Publishers of Comprehensive Services Service Description Federal Tax 26-volume service organized by topic, rather than Code sections. Popular Coordinator, features include editorial explanations, illustrations, planning ideas, and RIA warnings of potential tax traps. Merten’s, Law of Useful complement to traditional reference services. In-depth discussions of Federal Income general concepts of tax law. Often quoted in judicial decisions. Sometimes Taxation, difficult reading due to its legalistic style. Also, updating is less frequent than Thomson West most other services and not as accessible. Tax Management Useful complement to traditional reference services. Each booklet ranges in Portfolios, length from 50 to 200 pages and deals exclusively with a special tax topic BNA covering Code, Regulations, reference to primary authorities, and extensive editorial discussion, including numerous tax planning ideas. Problems of inconvenience may develop when there is no one portfolio squarely on point and the research effort requires reference to many portfolios. Updates are convenient though not extensive.Chapter 2, Exhibit 7b CCH Federal Taxation Basic Principles 25 of 32
Commercial Publishers of Comprehensive ServicesService DescriptionCCH ONLINE An electronic research service. Incorporates practitioner-oriented access methods to successfully located the desired tax information and to retrieve documents of special interest. Available in many different “libraries” addressing tax and nontax topics.LEXIS/NEXIS, An electronic research service. LEXIS accesses federal statutes, regulations,Reed Elsevier, Inc. IRS rulings, and judicial decisions. NEXIS contains the full text of over 500 publications.WESTLAW, West An electronic research service. Provides much of the same data as Lexis.Publishing Co. Available online or CD-ROM.Chapter 2, Exhibit 7c CCH Federal Taxation Basic Principles 26 of 32
Commercial Publishers of Judicial Decisions Service Description CCH Citator, CCH Two-volume, loose-leaf reference service. Contains alphabetical listing of Tax Court (formerly Board of Tax Appeals, “BTA”) and federal court decisions since 1913. Indicates a paragraph reference where each case is digested in the Compilation Volumes of the Standard Federal Tax Reporter. Each listing outlines the judicial history of a selected case beginning with the highest court to have ruled on that issue.Chapter 2, Exhibit 8a CCH Federal Taxation Basic Principles 27 of 32
Commercial Publishers of Judicial Decisions Service Description Federal Tax Seven-volume citator service organized in a manner consistent with Citator, CCH Citator. Provides an alphabetical list of court cases followed RIA by a descriptive legislative history of each case. U.S. Tax Cases Series of volumes that cover Supreme Court, Courts of Appeals, (USTC), District Courts, and Court of Federal Claims cases since 1913. CCHChapter 2, Exhibit 8b CCH Federal Taxation Basic Principles 28 of 32
Commercial Publishers of Judicial Decisions Service Description American Federal Comparable to USTC above. Tax Reports (AFTR), RIA Tax Court Publishes memorandum decisions of the Tax Court. Memorandum Decisions (TCM), CCH TC Memorandum Similar to TCM above. Decisions (TC Memo), RIAChapter 2, Exhibit 8c CCH Federal Taxation Basic Principles 29 of 32
Commercial Publishers of Current Developments Service DescriptionStandard Federal Tax Reports, CCH Weekly highlights of latest tax developmentsWeekly Alert, Weekly highlights of latest tax developmentsRIATax Notes, Weekly digests of new tax decisions.Tax AnalystsJournal of Taxation Monthly tax journal.Tax Adviser Monthly tax journal published by the AICPA.Chapter 2, Exhibit 9 CCH Federal Taxation Basic Principles 30 of 32
Organization of the IRS The four Operating Divisions include: Wage and Investment Income Division Small Business and Self-Employed Division Large Business and International Division Tax-Exempt Organizations and Governmental Entities DivisionChapter 2, Exhibit 10a CCH Federal Taxation Basic Principles 31 of 32
Organization of the IRS Other units include: Criminal Investigation IRS Appeals Office National Taxpayer Advocate Office of Chief Counsel Office of Professional Responsibility Whistleblower Office Communications and Liaison Office of Privacy, Governmental Liaison and DisclosureChapter 2, Exhibit 10b CCH Federal Taxation Basic Principles 32 of 32
IRS Communications The IRS issues communications to individual taxpayers and IRS personnel in three primary ways: Letter rulings Determination letters Technical advice memoranda IRS Publications also address a variety of general and special topics of concern to taxpayers.Chapter 2, Exhibit 11 CCH Federal Taxation Basic Principles 33 of 32
Examination of Returns Correspondence Examinations—These involve relatively simple problems that can generally be resolved by mail. District Office Examinations—These are conducted by a tax auditor either by correspondence or by interview. Field Examinations—These are conducted by revenue agents and involve more complex issues.Chapter 2, Exhibit 12 CCH Federal Taxation Basic Principles 34 of 32
Appeals Administrative Process If the taxpayer and the agent do not agree, the taxpayer has several options: Request a conference in the IRS Appeals Office File a petition in the Tax Court Wait for the 90-day period to expire, pay the assessment, and start a refund suit in the District Court or the Court of Federal ClaimsChapter 2, Exhibit 13 CCH Federal Taxation Basic Principles 35 of 32
Taxpayer Bill of Rights The Taxpayer Bill of Rights is divided into four major categories: Taxpayer rights and IRS obligations Levy and lien provisions Proceedings by taxpayers Authority of the Tax CourtChapter 2, Exhibit 14 CCH Federal Taxation Basic Principles 36 of 32
Choice of Tax Forum Factors to consider in deciding whether to litigate a case and where to litigate: Jurisdiction Publicity Payment of tax Legal precedent Jury trial Factual precedent Rules of evidence Statute of limitations Expertise of judges DiscoveryChapter 2, Exhibit 15 CCH Federal Taxation Basic Principles 37 of 32
Penalties Delinquency penalties Estate of gift tax valuation Accuracy-related and understatements fraud penalties Penalty for aiding Negligence penalty understatement of tax Substantial liability understatement of tax Civil fraud penalty liability Criminal fraud penalty Substantial valuation Estimated taxes and misstatement penalty underpayment penalties Substantial overstatement Failure to make deposits of of pension liabilities taxes Tax preparer penaltiesChapter 2, Exhibit 16 CCH Federal Taxation Basic Principles 38 of 32